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Transfer 2 Months Before Ch7
Adeeb clearly says that undoing the transfer undoes the 727
action. It also says, I believe, that fessing up at the 341
meeting, cures the taint of "fogetting" something on your
schedules. Bernard says that taking the money out of your bank and
putting it in your safe at home is a "transfer." Another case said
getting a cashiers check and carrying it around in your purse to
keep creditors from grabbing the money is a transfer for 727
purposes. Bernard makes no sense to me except that the debtor
initially lied about the funds saying that he lost them gambling
(ever had a client tell you that?). He finally fessed up (at trial
apparently) that he put the money in his safe at home.
Check out the Texas case of In re Davis, 911 F. 2d 560 (11th
Cir. 1990), the debtor, two days after a loan became due,
transferred his 50% interest in his home to his wife. His former
partner sued him in state court, obtained a judgment and filed a new
suit to unwind the transfer to his wife. On the advice of a
bankruptcy attorney, the debtor's wife reconveyed the interest to
the debtor who immediately filed a chapter 7 petition disclosing the
transfers. The bankruptcy court found that the transfer of property
of the debtor to his wife was made with the intent to hinder, delay
or defraud a creditor, notwithstanding the retransfer of the
property the day before the petition was filed, and denied the
discharge. The debtor contended that discharge should not be denied
because the transfer in question did not in fact diminish the assets
available to creditors. He explained that there was no equity in
the home beyond the homestead exemption. The court rejected that
analysis, observing:
"When appellant transferred his interest in the residence to
his wife, he obviously intended to shield what he thought was
valuable property from the claims of his creditors. To hold now
that there occurred no transfer of property with the intent to
hinder creditors merely because the debts on the residence exceeded
its estimated fair market value would be to reward appellant for his
wrongdoing, which the court refuses to do."
The 11th Circuit also specifically rejected the Adeeb
analysis that the word "transferred" means "stayed transferred."
Once the transfer was made and the requiste intent existed, the
discharge must be denied, notwithstanding what the debtor did later.
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Thank you to Mark, David and Dennis for your very helpful comments. I
guess we all need to be good lawyers and fix these problems.
David, in regard to your comments about contribution, are you saying
to schedule the client's retroactive portion of mortgage payments,
taxes, ins, etc.? If so, the debt to parents would be secured by the
client's interest in the property and would be a deduction against the
client's equity. Is that correct?
Thank you,
Mike Candiotti
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>
The case is In re Adeeb,787 F.2d 1339 (1986) 9th
Circuit, held by transferring the property back, the
debtor beats the 727 action for transfering within one
year. Some interesting language at the end of the
case which says the 9th Circuit should encourage
bankruptcy lawyers to fix the problems created by
these transfers. Go ahead and do it. Use all the
"might not work" language you can think of in the
retainer.
The opposite case is:
In re Bernard,
96 F.3d 1279, 65 USLW 2255, 36 Collier Bankr.Cas.2d
1585, 96 Cal. Daily Op. Serv. 7157, 96 Daily Journal
D.A.R. 11,749, 9th Cir.(Cal.), Sep 25, 1996
Bernard sucks. Bernard closed a bank account, moved
the money to another account, then spent the money in
the ordinary course. Bernard owed the IRS money and
admitted he closed the account to keep the IRS from
levying the account. Held, this was an attempt to
hinder, no discharge. Keep in mind, the IRS never
levied, and the debtor never moved the money from his
name, or his control. Held, still transfer, and still
a hinderance, no discharge.
Put Bernard with Adeeb, and we must fix these
transfers to be good lawyers.
dennis
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Mike,
This is always tricky. I think I agree that your approach is the best one, but be sure to include in your retainer agreement that you have advised that the transfer back to the debtor may not prevent a fraudulent transfer action or other actions based on the transfers. I don't think there would be a problem doing it the way you proposed, but you never know what a particular Trustee will or won't do (or, ultimately, the Judge). The potential problem here is that I don't think it is a valid defense to a fraudulent transfer litigation that the debtor could have exempted the value anyway (I haven't researched that in a while). Therefore, a Trustee could argue, the transferring back to the debtor should not be able to undo prior transfer (purging the taint, if you will).
Don't know if that helped, but those are my thoughts.
***********************************************
Mark J. Markus
Law Office of Mark J. Markus
11684 Ventura Blvd. PMB #403
Studio City, CA 91604-2652
(818)509-1173
(818)509-1460 (fax)
e-mail: bklawr@bklaw.com
web: http://www.bklaw.com/
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----- Original Message -----
To: cdcbaa@yahoogroups.com
Sent: Wednesday, October 27, 2004 10:06 AM
Subject: [cdcbaa] Transfer 2 Months Before Ch7
Hi to the group.
My question relates to the following:
New client comes to consultation. I learn that he was on title to
parents' property for at least 20 years. (property is a residential
parcel with single fam residence and duplex). Client has never paid
toward the property, except as a tenant, however he has taken a
mortgage interest deduction on at least two years' tax returns.
In about August, 2004, he transferred his interest to parents (to
facilitate a refinance). He wants to file Ch 7.
If we file now, I think a trustee could claim that client actually
does have an interest in the property, due to his being on title for
a long time and taking the mortgage inst deduction. Fraudulent
transfer issues are raised.
I think the the obstacle to Ch 7 could be removed by having parents
put him back on title prior to filing Ch 7 and having him schedule a
one-third interest in property. The equity is fairly small and
client could exempt his 1/3 of the equity.
Is this the correct way to handle this problem? Comments?
Thanks,
Mike Candiotti
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Mike,
This is always tricky. I think I agree that
your approach is the best one, but be sure to include in your retainer agreement
that you have advised that the transfer back to the debtor may not prevent a
fraudulent transfer action or other actions based on the transfers.
I don't think there would be a problem doing it the way you proposed, but you
never know what a particular Trustee will or won't do (or, ultimately, theJudge). The potential problem here is that I don't think it is a valid
defense to a fraudulent transfer litigation that the debtor could have exempted
the value anyway (I haven't researched that in a while). Therefore, aTrustee could argue, the transferring back to the debtor should not be able to
undo prior transfer (purging the taint, if you will).
Don't know if that helped, but those are my
thoughts.
***********************************************Mark J. MarkusLaw
Office of Mark J. Markus11684 Ventura Blvd. PMB #403Studio City, CA91604-2652(818)509-1173(818)509-1460 (fax)e-mail: bklawr@bklaw.comweb:
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If the debtor is able to exempt his 1/3 of the property after the transfer
then the answer is to transfer it back to him.
Jim King
-----Original Message-----
Sent: Wednesday, October 27, 2004 10:07 AM
To: cdcbaa@yahoogroups.com
Subject: [cdcbaa] Transfer 2 Months Before Ch7
Hi to the group.
My question relates to the following:
New client comes to consultation. I learn that he was on title to
parents' property for at least 20 years. (property is a residential
parcel with single fam residence and duplex). Client has never paid
toward the property, except as a tenant, however he has taken a
mortgage interest deduction on at least two years' tax returns.
In about August, 2004, he transferred his interest to parents (to
facilitate a refinance). He wants to file Ch 7.
If we file now, I think a trustee could claim that client actually
does have an interest in the property, due to his being on title for
a long time and taking the mortgage inst deduction. Fraudulent
transfer issues are raised.
I think the the obstacle to Ch 7 could be removed by having parents
put him back on title prior to filing Ch 7 and having him schedule a
one-third interest in property. The equity is fairly small and
client could exempt his 1/3 of the equity.
Is this the correct way to handle this problem? Comments?
Thanks,
Mike Candiotti
Yahoo! Groups Sponsor
ADVERTISEMENT
Yahoo! Groups Links
a.. To visit your group on the web, go to:
http://groups.yahoo.com/group/cdcbaa/
b.. To unsubscribe from this group, send an email to:
cdcbaa-unsubscribe@yahoogroups.com
c.. Your use of Yahoo! Groups is subject to the Yahoo! Terms of Service.
If the
debtor is able to exempt his 1/3 of the property after the transfer then the
answer is to transfer it back to him.
Jim
King
-----Original Message-----From: mhclaw
[mailto:mhclaw@yahoo.com]Sent: Wednesday, October 27, 2004 10:07
AMTo: cdcbaa@yahoogroups.comSubject: [cdcbaa] Transfer 2
Months Before Ch7Hi to the group. My question relates to the following:New client comes to
consultation. I learn that he was on title to parents' property for
at least 20 years. (property is a residential parcel with single fam
residence and duplex). Client has never paid toward the property,
except as a tenant, however he has taken a mortgage interest deduction on
at least two years' tax returns.In about August, 2004, he transferred
his interest to parents (to facilitate a refinance). He wants to
file Ch 7. If we file now, I think a trustee could claim
that client actually does have an interest in the property, due to his
being on title for a long time and taking the mortgage inst
deduction. Fraudulent transfer issues are raised.I think the
the obstacle to Ch 7 could be removed by having parents put him back on
title prior to filing Ch 7 and having him schedule a one-third interest in
property. The equity is fairly small and client could exempt his 1/3
of the equity.Is this the correct way to handle this problem?
Comments?Thanks,Mike
The post was migrated from Yahoo.
Hi to the group.
My question relates to the following:
New client comes to consultation. I learn that he was on title to
parents' property for at least 20 years. (property is a residential
parcel with single fam residence and duplex). Client has never paid
toward the property, except as a tenant, however he has taken a
mortgage interest deduction on at least two years' tax returns.
In about August, 2004, he transferred his interest to parents (to
facilitate a refinance). He wants to file Ch 7.
If we file now, I think a trustee could claim that client actually
does have an interest in the property, due to his being on title for
a long time and taking the mortgage inst deduction. Fraudulent
transfer issues are raised.
I think the the obstacle to Ch 7 could be removed by having parents
put him back on title prior to filing Ch 7 and having him schedule a
one-third interest in property. The equity is fairly small and
client could exempt his 1/3 of the equity.
Is this the correct way to handle this problem? Comments?
Thanks,
Mike Candiotti
The post was migrated from Yahoo.