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johngibson15219, Attorney
Category: Bankruptcy Law
Satisfied Customers: 159
Experience:  Admitted to Pennsylvania Bar 1980. I'm familiar with the new law.
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Filed Chapter 7 bankruptcy Feb 29, 2008 and it was discharge

Customer Question

Filed Chapter 7 bankruptcy Feb 29, 2008 and it was discharge on 5/20/2008. The State trustee from CA called and said I had title to my mothers property 9 months ago. It shows I quit claimed it back to her on 3/3/2007; (9mo ago) I said yes, My mother placed me on the title 2 yrs ago for refinance reasons, for a second mortgage, it was the mortgage lenders idea in order for her to qualify for the 2nd mortgage, The mortgage lender stated that I would have to be on the title and co-sign for this loan. My mother could not obtain the second mortgage,she is on a fixed income, widowed, elderly disabled female. In 2007 my Mother paid off the second loan just 9 months ago and then quit claimed me off of the title. And this is were the red flag comes into play with the US trustee, since I had answered one of the questions in the Bankruptcy questionaire, if I have transfered in or out of my name any property, and I checked the box that said NO. Because to the best of my knowledge this was not my property but my mothers, I only held naked title, I had no benefits in the property or enjoyed it use. I have not lived in the property since I left at 19 yrs of age and I am now 40yrs of age. I did not have equitable title, and carried no beneficial interst in the property. I answered all the questions to the best of my abilities. The US trustee is charging me with concealment tranfer of property, fraud intent to evade my creditors. Does he have any merrit? If I was the owner of the property I sure would not be renting were I am and would definately moved to San Francisco. What kind of question would he asked me during discovery? I want to provide him with all the evidence that I had no interest in this home of my parents/mother. Could you site some case law that are available so I can read them, pertaining to my situation. Published articles on similar cases.
Submitted: 8 years ago.
Category: Bankruptcy Law
Expert:  johngibson15219 replied 8 years ago.
Unfortunately, I recently had a similar case. The facts were not exactly the same but close enough. You transferred the property less than a year before you filed your Petition and that is a problem. It is a bigger problem, though, that you checked NO on the block dealing with transfers. If you had a bankruptcy attorney representing you, there may be some argument of malpractice but I think the argument would depend on whether or not he was under a duty to check to verify the information in your Petition was accurate by checking local real estate records within the past year and I think that argument may be pretty weak.

As for case law, the case law would appear to be largely in your favor since there was no fraudulent intent. If you did have a bankruptcy attorney, you may want to get him to represent you in this matter since he will be familiar with local practice. If you did not have a bankruptcy attorney then you want to hire an attorney who practice bankruptcy in the area where the trustee is located and where the bankruptcy was filed to defend it.

" Judge Hillman Rules No Fraudulent Conveyance in Divorce Transfer

In the recent case of In re Prichard, 2007 WL 458021 (Bankr.D.Mass., Feb 12, 2007) Massachusetts bankruptcy judge William C Hillman found in favor of the debtor in a fraudulent conveyance action brought by the trustee. Mr. Prichard had owned a house with his ex-wife which he transferred to her alone pursuant to a separation agreement incorporated into a judgment of divorce. The case was brought under the old Massachusetts version of the Uniform Fraudulent Conveyance Act which was repealed in favor of the Uniform Fraudulent Transfer Act in 1996. However, much of the reasoning in the case applies under both laws. In the actual-fraud prong of the trustee’s case, he alleged that the debtor had an actual intent to hinder, delay or defraud creditors when he made the transfer. This sort of allegation requires an examination of indicia or so-called “badges” of fraud. My guess is that the trustee brought this case because after the divorce the debtor moved back in with his ex-wife. His wife testified that this was not a “normal situation” but it also appears from the testimony that the couple did not resume a married lifestyle but merely carried on a civil co-existence. The judge stated: “I could conclude that the Trustee met his initial burden of demonstrating actual fraud under § 7 of the UFCA simply because Thomas conveyed his property in favor of a family member over his creditors.” The court then went on to find additional badges of fraud that solidified its conclusion that the trustee had met his initial burden. The issue then became whether there was “sufficient evidence of a legitimate supervening purpose for the transfer of the Property, such as to rebut the indication that [the debtor] effected the transfer of the Property with fraudulent intent.” The judge declined to find that the marital difficulties leading to the transfer were a sham, stating that at “at the time of the transfer, Thomas did not retain any interest in the Property, but transferred his interest in it to [his ex-wife] who assumed complete responsibility for the Property and household’s upkeep. To conclude now that this transaction was some sort of sham would require that I find that [the debtor and his ex-wife] staged their marital difficulties, while Thomas set up separate residences in 1989 and for the five years following, with the full intention of eventually returning to live in the Property in 1994. The evidence does not so prove and I do not so conclude.”