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Hello and thank you for allowing me the opportunity to assist you.
Can you clarify which "10 year ban" you're referring to?
Hi again. Thank you for clarifying your question.
You Wrote: “IT IS MY UNDERSTANDING THAT IF ONE WERE TO UTILIZE NON-EXEMPT ASSETS (CASH) TO PURCHASE AN EXEMPT ASSET (A TEXAS HOMESTEAD) THAT THE EXEMPTION WOULD NOT BE GRANTED IN BANKRUPTCY UNTIL 10 YEARS AFTER THE SAID PURCHASE.”
My Response: The 10 year ban you are referring to is from the following located in the Bankruptcy Code:
§ 548. Fraudulent transfers and obligations
(e)(1) In addition to any transfer that the trustee may otherwise avoid, the trustee may avoid any transfer of an interest of the debtor in property that was made on or within 10 years before the date of the filing of the petition, if—
(A) such transfer was made to a self-settled trust or similar device;
(B) such transfer was by the debtor;
(C) the debtor is a beneficiary of such trust or similar device; and
(D) the debtor made such transfer with actual intent to hinder, delay, or defraud any entity to which the debtor was or became, on or after the date that such transfer was made, indebted.
The above law does prevent a debtor from using non-exempt cash to purchase exempt property if it is done with the intent to defraud creditors. In determining whether you had such intent, the court would review all of the pertinent facts surrounding your case. The fact you are not insolvent and have not defaulted on any debt will work in your favor. On the other hand, if your financial situation remained the same and yet you suddenly decided to default on the debt and file for bankruptcy protection, that will be a red flag.
Unfortunately, the fact that the house is worth less than $125k (the amount of homestead exemption allowed for homes purchased within 1215 days of filing) will not help your case, and in fact it may even hurt since it will appear that you purposely bought a home up to the limit of the allowed exemption in order to protect those funds.
Although my answer was unfavorable, please understand that my goal was to provide you with honest information, as that will help you most. With that in mind, I hope that you found my answer useful. If so, then please remember to click the green accept button so that I will receive credit and compensation for my time. Positive feedback is always appreciated as well. Thank you and good luck!
DISCLAIMER: Please understand that the complexities of most legal problems cannot be adequately addressed in this setting, and that I am only licensed to practice law in the state of Maryland. Accordingly, you acknowledge (1) that we have not formed an attorney-client relationship, and (2) that my post is general information only and not specific legal advice.
You Wrote: “THANK YOU. BUT REMEMBER THAT MY QUERY WAS WHETHER THE TEXAS EXEMPTIONS FROM JUDGEMENTS LAW WOULD ENABLE ME TO KEEP THE PROPERTY UNTIL I COULD FILE FOR BANKRUPTCY (10 YEARS)”
My Response: Oh, I’m sorry. The answer to that question is “yes.” Texas’ homestead exemption is absolute, and therefore, it doesn’t matter whether you had the intent to hinder creditors by converting non-exempt assets into a homestead. Here is part of a 5th Circuit case that discusses this scenario, and it quotes Texas case law (apparently there are no recent cases on the issue):
The bankruptcy judge […] referred to Texas law to determine both what property was exempt and whether the exemption was defeated by the eleventh-hour conversion [of non-exempt assets to the exempt homestead]. Texas constitutional and statutory protection of the homestead is absolute, and the bankruptcy judge interpreted Texas law to allow the exemption in full regardless of Reed's intent. Swayne v. Chase, 88 Tex. 218, 30 S.W. 1049 (1895); Garrard v. Henderson, 209 S.W.2d 225 (Tex.Civ.App.1948); Finn v. Krut, 13 Tex.Civ.App. 36, 34 S.W. 1013 (1896); Bell v. Beazley, 18 Tex.Civ.App. 639, 45 S.W. 401 (1898); Southern Irr. Co. v. Wharton Nat'l Bank, 144 S.W. 701 (Tex.Civ.App.1912). In re Hammonds, 198 F. 574 (E.D.Ky.1912) (since state statutory protection of exemption is absolute, intent of debtor is irrelevant to allowance of exemption). Reed, Matter of, 700 F.2d 986 (C.A.5 (Tex.), 1983).
Have I satisfactorily addressed your concerns? If not, then please feel free to ask for clarification.
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