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cfortunato, Attorney
Category: Bankruptcy Law
Satisfied Customers: 8023
Experience:  Bankruptcy professor.
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My father-in-law transferred his property into my wifes name

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My father-in-law transferred his property into my wifes name a number of years ago. She is an only child and they thought that would be easy estate planning. That is a problem now that I am considering filing bankruptcy due to two rental properies (that won't sell) that have depleted our savings. She transferred the property back into his name and arranged for a better method of estate planning. While this is just better estate planning and gets a tax burden out of our name, I could see where the timing could make it suspect. Each transaction was for $0. Are their "lookback" provisions regarding such transactions if I (or we) were to file bankruptcy (in CO)?
Hi JACustomer,
The "look-back" period is 2 years before the date of a Bankruptcy filing. This means a Bankrutpcy trustee cannot do anything about property that was transferred more than 2 years before a Bankruptcy was filed. Bankruptcy Stat. 548(a)(1).
However, as the property was given to your wife only, it is considered to be a gift. Gifts to one spouse only are separate property, and belong to that spouse only. This means her transferring the property back to her father would not affect a Bankrutpcy filing if you file alone, only if she also files (less than 2 years after transferring the property).
(It does not matter that the reason for the transfer was for estate planning.)

I think this is what you wanted to know. If not, please let me know.
Thank you!
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Customer: replied 6 years ago.
Thank you for your insightful answer. The rental properties and most other debt are in both of our names. Would a bankruptcy filed by me alone potentially discharge those debts? That is, she may not have to file bankruptcy for us to get out from under these properties as soon as possible?

Does your wife work?

Does your homestead have more than $60,000 equity?

Customer: replied 6 years ago.
My wife works 3-4 days per week and is a full-time student at Kaplan Online University. We have around $30,000 equity at our property. Her dad's property is paid for. The rentals are worth less than what we owe.
Last question - does your wife take home less than $217.50 per week?
Customer: replied 6 years ago.
It looks like her last check netted $236 + $50 for going in an extra day to fill in. This happens periodically, so I would have to say she takes home slightly more.

If the rental properties foreclose, the lender(s) can get a deficiency judgment for the balance of the mortgage after the house sells at a foreclosure sale. Since the market is currently depressed, there is a backlog of foreclosure properties on the market, and not much demand for them. Accordingly, it can take years for your properties to sell, and then that long for the lender(s) to get deficiency judgments.

You should be able to have these judgments discharged by filing a Bankruptcy. You can either file one now or after the lender(s) get judgments.

If you file on your own, your liability for the mortgages will be discharged, but your wife will remain liable - at least until she can also file a Bankruptcy.

However, since she earns so little, there isn't much a judgment holder can do to her, as each can only garnish up to 25% of the amount that she takes home that is over $217.50, and I think that by the time judgments are in place, it will be close to 2 years after the property was transferred.



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Customer: replied 6 years ago.
What an excellent job answering and anticipating my questions. Thank you for your thoughtfulness.