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TJ, Esq.
TJ, Esq., Attorney
Category: Bankruptcy Law
Satisfied Customers: 12358
Experience:  JD, MBA
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I own a home, I quit claim dead over to my son, it is ...

Customer Question

I own a home, I quit claim dead over to my son, it is still mine, I make all payments on it, and he knows that, it was just incase something happened to me, it would not have to go to probate court, now his job is shakey and he might have to file bankrupcy, he has quit claimed it back to me, can they still take my home.
Submitted: 9 years ago.
Category: Bankruptcy Law
Expert:  TJ, Esq. replied 9 years ago.

Hello and thank you for allowing me to address your legal question.

Yes, there is a possibility that the home can be taken since the quitclaim to you may be considered a “fraudulent conveyance.”

A fraudulent conveyance occurs when a debtor transfers ownership of his property in an effort to keep his creditors from using it to repay a debt. When that is proved, a bankruptcy trustee can reverse the transfer. Some of the factors that are taken into account when determining whether a transfer is fraudulent include (1) the timing of the transfer, (2) whether the debtor received any compensation for the transfer, and (3) whether the transfer was made to an “insider” (i.e. a relative). There are other factors as well, but those appear to be the most relevant to you based upon your post.

However, you may have an argument that the conveyance was not fraudulent because your son only owned the property on paper…not in substance. In other words, he never gave you compensation for the property when you quitclaimed it to him, he never paid the mortgage or taxes, and he doesn’t reside on the property. Also, your intent in transferring ownership was simply an estate planning tool, and that neither of you ever believed that he truly owned it. It’s a matter of substance over form. I don’t know how a court would rule, but I think you have a decent argument.

If the information that I provided was helpful, please remember to ACCEPT my post as that is the only way I will receive credit and compensation for my answer. However, please understand that my answer is meant for informational purposes only and is limited by the facts presented. Therefore, it should not be construed as “legal advice” and is not an adequate substitute for the retention of legal counsel. Thank you and good luck!

Customer: replied 9 years ago.
I need to know the time, you said it was the timing so what is the time til he can safely file bankrupcy. Thanks so much, for your answer
Expert:  TJ, Esq. replied 9 years ago.
The Bankruptcy Code assumes that any transfer made two years prior to filing for bankruptcy is fraudulent if the debtor did not receive adequate compensation in return. Nothing more needs to be proved, and the transfer can be reversed.

However, state laws generally hold that purposely defrauding creditors is illegal. Therefore, if the bankruptcy trustee or creditor can prove that the debtor intended to defraud creditors, then the transfer can be reversed no matter when it occurred. In this scenario, the timing of the transfer is still important because it can be evidence in proving the intent of the debtor.

Therefore, if your son is purposely attempting to keep the property away from his creditors, then there is no safe time to do what you suggest. That said, the longer he waits to file for bankruptcy after the transfer, the less likely the transfer will appear to be fraudulent.