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.
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