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cfortunato
cfortunato, Attorney
Category: Bankruptcy Law
Satisfied Customers: 8023
Experience:  Bankruptcy professor.
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My wife will be filling for BK in CA, and 15 month ago she

Resolved Question:

My wife will be filling for BK in CA, and 15 month ago she transfered 40K to the trust for my son, and she is the trustee, but not the benefeciary for the trust, would that be a problem, also Can she affirm all the debt but the law suit that is pending
Please advise
Submitted: 1 year ago.
Category: Bankruptcy Law
Expert:  cfortunato replied 1 year ago.

cfortunato :

Hi JACustomer,

Customer:

hello

cfortunato :

The answer to your question will depend on whether your wife was solvent or insolvent at the time of the $40K transfer and immediately after the transfer.

Customer:

what do you mean by solvant or insolvant please

cfortunato :

Solvent means her total assets were greater than her total debts at the time of the transfer.

Customer:

the trust is irrevocable, living trust for her MOm, and the benefeciary is the Son

Customer:

I would say solvent, and the only reason for the BK is to stop a law suit she has nothing to do with, and we will be affirming all debts

Customer:

when it comes to the question have you transfered any assents to a trust how far they would go to verify that information is it only the 90 days or greater than that

cfortunato :

If your wife was solvent at the time of the 40K transfer, and if transferring the 40K did not make her insolvent, then there would not be a problem.

Customer:

as I stated the only reason for the BK is to stop the lawsuit nothing else

cfortunato :

The lookback period for a transfer of assets for someone else's benefit is 2 years.

cfortunato :

90 days is the lookback period for payments to creditors.

Customer:

when it comes to aswering that question then she should say yes

cfortunato :

Yes - she has to respond that she did transfer assets within the 2 years before filing her Bankruptcy. But the trustee will not be able to reverse the transfer is she was solvent before and immediately after the transfer.

Customer:

That is good to know

Customer:

another question for

Customer:

I talked to you yesterday about the house that the wife live in CA , and my BK was in Fl, the creditors was intrested in the house in CA which is owned by my sister inlaw since 2008, can they come back and say that no I do own that house, and it should be listed in the petetion

cfortunato :

No - they cannot claim that you own the house, because your name is XXXXX XXXXX the deed, and your name never was on the deed. Therefore, neither the CA house nor the FL house should be listed on the Bankruptcy paperwork.

Customer:

WOW

Customer:

going back to the trust, question can the trustee ask how much is in the trust, since she is not the benefeciary for that trust

cfortunato :

Yes - but also that amount should be listed on the Bankruptcy petition (Line 10 of the Statement of Financial Affairs).

cfortunato :

Also, your wife should be ready and able to prove that she was solvent at the time of the transfer.

Customer:

if I remeber the question is are you a benefeciary of a trust and the answer would be no /

Customer:

she is not the benefeciary

cfortunato :

That would be on Schedule B. The $40K transfer belongs on the Statement of Financial Affairs (Line 10).

Customer:

in this case what is the best and the worst case senerio

cfortunato :

The worst that could happen - if your wife cannot prove she was solvent at the time of the transfer - is the trustee can take the money or whatever else is in the trust - even though the trust is irrevocable.

Customer:

do you think is it a good idea to transfer the funds from the trust account

Customer:

or change her as a trustee

cfortunato :

If she was not solvent at the time of transfer, it might be better for her to wait another 9 months before filing.

Customer:

I'm sure she was, but how would be able to prove it

cfortunato :

She has to make a list of everything she owned at the time of the transfer, and she also has to make a list of all of her everything she owed (her total debts) at the time of the transfer.

Customer:

do you think is it a good idea to close or trasfer the funds from the bank account

Customer:

or change her as a trustee

cfortunato :

I don't think the funds can be taken out of the trust if it is irrevocable. In any event, her being a trustee will not make a difference.

cfortunato :

If she is able to take the money back out of the trust (with permission of the beneficiaries), then that money will have no protection at all.

cfortunato :

In other words, the money is safer in the trust.

Customer:

so what is the best way of handeling the sitiuation in this case in your opinion and in general

Customer:

so she be in the safe side when she files

Customer:

can we say the money is spent which is true by the way

cfortunato :

The safest way would be for her to wait another 9 months to file - until 2 years have passed since the 40K was transferred.

Customer:

the problem with that is the pending lawsuit

cfortunato :

If she waits another 9 months, the transfer will not have to be disclosed on the Bankruptcy petition, and the Bankruptcy trustee will not know about the transfer - and will not be able to do anything even if he did find out about - whether or not she was solvent.

Customer:

otherwise she would not care

cfortunato :

Any judgment from the lawsuit can still be discharged if a Bankruptcy is filed after the lawsuit is over.

Customer:

this case is intentional misrepresentation, and if they took a judgment that would cuase a problem, and it will not be dismissable in BK

cfortunato :

Didn't the lawsuit just start?

Customer:

yes

Customer:

and the 1st hearing is in april 15th

Customer:

but we can't keep paying the attorney in CA

cfortunato :

If the judgment cannot be discharged in a Bankruptcy, why are you thinking about filing a Bankruptcy.

Customer:

so the advise was to file the BK to stop the the lawsuit

Customer:

becuase the case just started and there is no judgment

cfortunato :

But the lawsuit will only be stopped temporarily. It can resume as soon as your Bankruptcy is finished (4-6 months), or it can resume right away if the plaintiff asks permission of the Bankruptcy court.

Customer:

that is if they file for adversary action is that correct, and only if they object to the BK

cfortunato :

They do not have grounds to ask that your Bankruptcy be dismissed, but yes - they would have to ask the Bankruptcy court to determine that your liability to them is non-dischargeable - based on the fact that the lawsuit is based on fraud or a false representation. This would have to be done whether a Bankruptcy is filed before or after they get a judgment.

Customer:

just to let you know that we have nothing to do with this lawsuit we got involved in it becuase the relative was using the house a storage

Customer:

so to summrize what is the best way of handeling the sitiuation

Customer:

if I understand the last statement correctly even after they take a judgment and if they decide not to object to the BK the BK would go through

cfortunato :

If the lawsuit is not about money or property that was borrowed, then a judgment would be dischargeable even if it is based on fraud or a false representation.

Customer:

no it is not i

Customer:

it is about a contract

Customer:

but they are suing for the difference in price

cfortunato :

Was the contract about services provided?

Customer:

it was a bout book purchased at a discount and these books was not supposed to be sold, but they where sold

Customer:

books

cfortunato :

That does not sound like a false representation.

Customer:

now they are asking the fifference in the discounted and the listed msrp

Customer:

will the cotract stated that these books could not be sold , but the relative was selling them

cfortunato :

That is not fraud or a false representation.

Customer:

the compnay is suing everybody was living or has an address in CA house an

Customer:

I know that but that what they are suing for

Customer:

the attorney in CA is trying to remove her name from the lawsuit

Customer:

and I already file for BK in FL

cfortunato :

In any event, the safest would be to wait at least 9 months before filing a Bankruptcy. I will take at least 9 months for the company to be able to do anything even if they do get a judgment.

Customer:

one of the question in the paers , state have you paid any of your family or friends

Customer:

are we talking about the same time fram 2 years or 9 month

cfortunato :

Gifts to family members within one year before filing, and transfers of assets to anyone - including family members within 2 years before filing.

Customer:

thank you so much for your help

cfortunato :

You're welcome!

cfortunato :

And please have a pleasant evening!

cfortunato, Attorney
Category: Bankruptcy Law
Satisfied Customers: 8023
Experience: Bankruptcy professor.
cfortunato and other Bankruptcy Law Specialists are ready to help you

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