A debtor is allowed to transfer exempt assets into non-exempt assets. Doing this is not considered to be a fraudulent transfer, which can come about only when assets are transferred to another person.
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11 U.S.C. 522
(o) For purposes of subsection (b)(3)(A), and notwithstanding subsection (a), the value of an interest in--
(1) real or personal property that the debtor or a dependent of the debtor uses as a residence;
(2) a cooperative that owns property that the debtor or a dependent of the debtor uses as a residence;
(3) a burial plot for the debtor or a dependent of the debtor; or
(4) real or personal property that the debtor or a dependent of the debtor claims as a homestead;
shall be reduced to the extent that such value is attributable to any portion of any property that the debtor disposed of in the 10-year period ending on the date of the filing of the petition with the intent to hinder, delay, or defraud a creditor and that the debtor could not exempt, or that portion that the debtor could not exempt, under subsection (b), if on such date the debtor had held the property so disposed of.
This seems to say that if a court finds that using the proceeds of my settlement to purchase a new principal residence constitutes a disposition of non-exempt property with the intent to hinder, delay, or defraud a creditor,.my homestead exemption would be reduced by the amount of settlement money that I used to purchase the residence. How would the court decide on what my intent was? Who has the burden of proving my intent: me or the creditor?
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