楊清泉律師 - PRE-FILING TRANSFER OF HOUSE TO SON FRAUDULENT PART 2

In Re Krepps, the Chapter 13 debtor’s bankruptcy schedules said he owned his home, and planned to surrender it in full satisfaction of the mortgage. He affirmed these statements at the meeting of creditors. He did not disclose either in his schedules or at the meeting that he conveyed the property to his son 11 days before he filed his bankruptcy. He also failed to disclose that the property was destroyed by fire five days before his plan was confirmed. The trustee filed an adversary proceeding against the debtor and his son seeking to avoid the transfer as fraudulent pursuant to Section 548 which provides for the avoidance powers of the trustee relating to fraudulent transfers. The trustee also sought either to set aside the transfer or recover its value pursuant to Section 550. The debtor timely responded to the complaint and the trustee’s interrogatories. However, he failed to file timely respond to either the trustee’s Request for production of documents or the Request for admissions. Consequently, it was deemed admitted that the debtor transferred the property to his son for no consideration with the intent to defraud, hinder or delay his creditors; that the debtor retained possession of the property following the transfer; that the debtor had been sued or had been threatened with suit prior to the transfer; and that that the property was substantially all of the debtor’s assets. Given the admissions, the court found that the transfer was fraudulent.

However, the court did not agree that the trustee could recover the transfer or its value from the debtor. “Section 550 expressly allows recovery from the initial transferee (son), not the initial transferor (debtor). The trustee has not asserted (the debtor) is an ‘entity for whose benefit such a transfer is made.’ In fact, (the debtor0 denies receiving any benefit from the transfer… Therefore, at this point, I find the trustee has failed to establish as a matter of law that she is entitled to recover from (the debtor) the property or value of the property…”the court said.

Lawrence Bautista Yang is a graduate of Georgetown University Law Center and has been in law practice for thirty years. He specializes in bankruptcy, business and civil litigation and has handled more than five thousand successful bankruptcy cases in California. He speaks Mandarin and Fujien and looks forward to discussing your case with you personally. Please call (626) 284-1142 for an appointment at 1000 S Fremont Ave Bldg A-1 Suite 1125 Unit 58 Alhambra, CA 91803.