View Full Version : Bankruptcy & Mineral Rights - Legal Question



zookeeper
01-21-2014, 10:13 PM
I received some really sad news tonight. A very good friend, who I thought had zero money troubles with a lot in savings, actually has little in savings and now is having to contemplate bankruptcy. He owns mineral rights that pay him somewhere around $800 a month. He definitely qualifies for Chapter 7 due to his not being able to work and hospital bills. His wife only makes about $28,000 a year. I didn't want to say anything to him, but he's under the impression they can keep those rights and continue receiving that income. I just casually mentioned that it's a shame he'd lose his mineral rights. All he did was shake his head and say, "Exempt in Oklahoma for people like us." I've never heard of this, though sounds like something an oil state might do. Is there anything cut and dried about it? I am really concerned that he's apparently going to move forward thinking he won't have to liquidate those rights. With an understanding that you're not his or my lawyer, do any of you legal eagles have any idea if what he's told me could be true?

adaniel
01-21-2014, 11:01 PM
Well, I'm not a lawyer, but I do deal with mineral rights. I did not stay at a Holiday Inn last night though :-)

If your friend has it in some sort of trust, there is an outside chance he can keep it as acting trustee. Its actually quite common for people to own mineral rights in trusts. An actual lawyer may need to break this down as I am not sure as to specifics.

If not, he can kiss those rights goodbye, especially if they are producing. That is considered an income generating asset, and will most certainly be listed as such on the petition to ready it for eventual liquidation. Any sort of asset, outside of your primary home, vehicle, and IRA/401K, the bankruptcy trustee is going to get his or her grubby little hands on it.

If I were your friend, I would ask myself: is getting rid of these mineral rights worth it to be done with my bills and to start all over? Or should I just sell them myself and net some money that way? Either way I wouldn't cling to them. When you are that broke, you gotta weight all your options and consider nothing sacred.

MWCGuy
01-22-2014, 01:59 AM
If your friend is seeking bankrputcy protection he would be best to go the route of a Chapter 13. You don't loose anything, the lawyer submits a plan for you to pay your bills and the trustee signs off on it. I have actually had to go through one myself. The only thing I heard the trustee balk was one couple who insisted on needing to send their child to a private school. He more or less explained to them that a public school was available for them to use and the expense of private school could go towards paying down their debt. You still have money to live comfortable on you just are not going to be able to live a park avenue lifestyle.

kevinpate
01-22-2014, 04:32 AM
I don't practice in that area, but know some folks who do. The sole advice I will offer if if your friend is looking into the BR process, he and his lovely need to sit down with someone who knows BR, and knows it well. I am going to send you a pm with a name and contact info of an attorney I have known for over twenty years. Your friends are free to mention my name, or not, as they elect. There's nada in the matter for me either way.