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TJ, Esq.
TJ, Esq., Attorney
Category: Bankruptcy Law
Satisfied Customers: 9679
Experience:  Licensed to Practice Law
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My sister filed for bankruptcy on April 22, 2009. On July

Customer Question

My sister filed for bankruptcy on April 22, 2009. On July 20, 2007 she transferred her 1/2 interest in our mobile home and .56 acre of land to me. I loaned her $600 June 2007 and have paid for her 1/2 of the upkeep, power, phone, cable and internet access and insurance on the premises. I have also provided her with food, OTC medicines and transportation as well as providing for the animals and belong jointly to us.

The trustee has indicated that "pursuant to 11 U.S.C. subsection 548, the Bankruptcy Trustee may avoid any transfer of an interest of a Debtor in property to or for the benefit of an insider that occurred within two years before the filing of the bankruptcy petition, so long as the Debtor did not receive value in exchange for the transfer.

I have two week to respond before the Trustee files an adversary complaint in Bankruptcy Court for recover of the property or the value of it.

What does this mean? I have filed a Homestead Declaration on this property.
Submitted: 5 years ago.
Category: Bankruptcy Law
Expert:  TJ, Esq. replied 5 years ago.

Hello and thank you for allowing me the opportunity to assist you.

Question: “What does this mean?”

Answer: Well, the bankruptcy trustee is correct. After a debtor files for bankruptcy, her non-exempt assets are taken and sold, and the proceeds are divided among her creditors. So, a clever debtor may think “why should I let my assets be taken and sold when I can give them to my family and friends instead? In fact, if I do that, then my family and friends will probably let me use those assets as if I still owned them.” That is called a fraudulent transfer because that debtor would basically be defrauding her creditors. If the debtor legitimately sold the asset, then that’s legal because the proceeds from the sale can be taken to repay her creditors just like the original asset could have been taken.

So, the purpose of the law is to prevent people from giving away their assets prior to filing for bankruptcy.

It sounds like your best defense is going to be that you were given the property in exchange for paying for paying for your sister’s utilities, food, medicines, etc. I have to be honest, however, that I think you have a weak case since the mobile home is probably worth much more than those bills that you’ve paid. Still, that is probably your best argument. You’ll want to prove that you’ve paid such bills if possible (i.e. show receipts, etc.). I also think you’ll want to frame it as a conscious exchange of benefits. If you frame it as she gave you the property, and therefore, you’re helping her out, then that will not help your case since the transaction should be viewed as a true sale.

Have I satisfactorily addressed your concerns? If not, then please feel free to ask for clarification.

If the information that I provided was helpful, 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!

.

TJ, Esq., Attorney
Category: Bankruptcy Law
Satisfied Customers: 9679
Experience: Licensed to Practice Law
TJ, Esq. and 3 other Bankruptcy Law Specialists are ready to help you
Customer: replied 5 years ago.

Thanks.

 

The mobile has very little value and the land is worth about $10,000. Having paid for my sister since August 2007 at a conservative estimated cost of $500 a month and monies I have already loaned her, I believe that I have more than paid for the value of her 1/2 of the premises. The house was not transferred as an intent to commit fraud of any kind. It was transferred as a way for my sister to keep a roof over her head and have room and board provided for her.

 

We do have a firm working on this. Thanks for your assistance.

Expert:  TJ, Esq. replied 5 years ago.
It sounds like you may have a decent case after all. Keep in mind, however, that the unpaid loan can't really factor into the situation because she has an obligation to repay you. In other words, if she has to repay you, then clearly you didn't give her the money in partial exchange for the property. Therefore, if the "loan" was not really a loan, then you'll want to clarify that it was also part of the deal, thereby making the property transfer a little more fair.

I truly wish you luck!



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