Debt and Tax Relief / Debt Consolidation / Property Exemptions / Subprime Mortgages

Fraudulent Transfer Voids Homestead Exemption


In the bankruptcy case of Littleton, William L.; In re, the bankruptcy court rejected the debtor’s homestead exemption.

The details of the bankruptcy case:

“The Chapter 7 debtor owned no real prop­erty when he filed for bankruptcy. He disclosed that he transferred 6.64 acres of land in Tennessee about two months prior to filing for bankruptcy. After the trustee successfully had the transfer set aside as a fraudulent conveyance, the debtor attempted to claim the property as his exempt homestead. The debtor said the property was his home before he moved in with the person to whom he had transferred his home. The consideration for the transfer was the transferee’s promise to care for him.”

The bankruptcy court ruled that the debtor could not claim the property as an exempt asset because he did not own the home at the time of filing bankruptcy (due to the fraudulent transfer) and because the debtor was not using the property as his homestead.

We have said this many times; but we’re going to say it again–don’t do any transfers of assets before filing for bankruptcy.  Transferring assets from yourself to someone else in exchange for “taking care of you” or some other vague value is not likely to stand the bankruptcy court’s “fraud sniff test.”  If you transfer assets before filing for bankruptcy, you are jeopardizing your assets and your bankruptcy case.  Please speak with a bankruptcy attorney if you have made recent asset transfers and plan to file bankruptcy.

Source: Consumer Bankruptcy News, Volume 19, Issue 18, page 17