Bankruptcy

Unauthorized Post Petition Transfer Leads to Denial of Discharge

By Bill McLeod, Esq.

Transferring real estate while contemplating bankruptcy can raise some issues. But transferring real estate after the bankruptcy case has been filed without the permission of the bankruptcy court is a big ?no no.? And as a debtor in learned in a February 11 Bankruptcy Court ruling out of Worcester, it can raises some serious problems. In his case, a denial of his discharge.

The chapter 7 debtor filed the case on May 18, 2007. He owned his home along with his mother. According to his bankruptcy schedules, he valued the home at approximately $315,000 and with a mortgage of about $263,000. A mere 7 days later, the debtor transferred his interest in the home to his mother and father for $1.00. The debtor?s parents paid off the outstanding mortgages, as well as some other bills at closing.

Debtor attempted to argue that there was no equity in the home and that the appraisal should not be considered as ?completely accurate?. However, the appraisal was dated 8 days prior to the case being filed, and it was an appraisal commissioned by the debtor himself. Notwithstanding this creative position, the debtor never produced any evidence demonstrating that the property would be appraised at another value (i.e., by submitted evidence of another appraisal, or of some substantive defect with the appraisal submitted).

The trustee contended that the property had equity and that the debtor intended to ?hinder, delay or defraud? the creditors, the trustee and the bankruptcy estate by transferring it out of his name. Because of that not only should the debtor?s discharge be denied, but the transaction should be avoided (or set aside).

Full post as published by McLeod Law Offices on March 09, 2008 (boomark / email).