Fraudulent Transfer?

[AngelinaCat]

Hi Ormolu611. Welcome to the forum!

From my limited experience with property issues here in the state of Florida, I would say that the trustee is on a fishing expedition. I don't know for sure, but I bet that when he/she finds out there is no equity and a lot of details to untangle before a sale can be made, this property will be dropped like a hot rock.

However, there are some hurdles you have to jump first. You likely will be ruled to be an Asset Case. You said that you will have to go to a hearing. It sounds like it might be a 2004(b) Examination. Here is some reading material courtesy Cornell University:

http://www.law.cornell.edu/rules/frbp/rule_2004

When there, if you are asked why your Dad didn't step in to help you financially, be honest and say that at the 341, your mind went blank, and you gave the answer that you did, and that now you have had time to think about it, state what you said in your post.

As to the technicalities of what you are asking, I will have to defer to someone more knowledgeable about partnerships and property ownership than I am. With that said, keep in mind that this is the weekend, and Father's Day is tomorrow, so many of our regulars will be engaged with other activities this weekend.

I would suggest, if your attorney has not already told you this, get all of your paperwork together regarding the partnership and this property. Will you be represented at this hearing by your attorney? I hope so. But it is possible that he/she may charge extra for this service.

I am curious. What part of Florida are you in. Florida Middle District covers much, but not all, of the peninsula. We are far enough north that our courthouse is Jacksonville. Florida Middle has courthouses in Orlando and Tampa.

Good luck to you!

[Ormolu611]

Anyone?

[Ormolu611]

Oh, and I am in Florida by the way.

[Ormolu611]

I have filed for chapter 7 bankruptcy, hired an attorney, and just had my 341 meeting of the creditors. Well, in this meeting, the trustee who I was assigned to asked a question about a rental property that my Dad owns. My Dad and I owned a corporation several years ago, 50%/50%, and we flipped house through this corp. When the market crashed in 2007, the last house that we bought was suddenly not salable as it has immediately lost a bunch of equity as values plummeted. We bought it for about $40k and it was now worth maybe half that. We were out of business.

My Dad had financed the purchase of the houses we bought with a home equity line of credit taken against his own personal residence, and this house was no different. I guess you could say that he “loaned” the corporation the money, and the corporation “repaid” him after selling the asset (house). We split the profits 50%/50%. Well after the market crashed, I got a call from my Dad saying that we were out of business because his equity line was revoked by his bank. We had no more funding. My Dad had to do something since his borrowed money was tied up in this most recent house, so he rented it out. The rental payments were made to him, not the corp. I never saw any $$ from this house nor did I expect to.

My Dad eventually deactivated the corp’s status as we were essentially not in business anymore. Some time later, in September of 2012, my Dad transferred the deed of the property into his name from the corp’s name for insurance reasons. He could not maintain the home’s insurance otherwise.

So, nearly a year later, I am filing chapter 7, and the trustee blindsides me (and my attorney) and asks about this property and the transfer of title with apparently no exchange of money. He argues that I have a 50% interest in the property. Now I have to attend a adversarial hearing (I think that is what it is called). It seems he thinks this was a deliberate attempt to hide something and this is just not the case.

I don’t see what the issue is for the following reasons, and perhaps someone out there can give me some feedback. Number 1, the house has no equity. It is upside down/ under water. That’s why we did not sell it back in the day – my Dad did not want to be a landlord. It is in fact not an asset at all but rather a liability to this day. Secondly, since my Dad funded his house purchase with his own personal equity account, and our corp essentially defaulted since we could not sell it, was it not in my Dad’s rights to take steps to protect his own personal residence, whose equity was now partially invested into this rental house? I, after all, had no money invested in the thing from the get go. I always viewed it as his house after we could not sell it. He, after all paid for it. 100% of his own money.

The trustee asked if my father knew about my financial difficulties and I said yes. He then asked why my dad did not help out when he knew this. At the time, I could only answer that “I could not answer that question.” But now after the fact, I would have said that because I understood that my Dad had a lot more to lose than I did. His own residence is on the line as a result of this purchase. My attorney says on one hand that he is not sure how this will play out, but on the other hand he does not see how they can go after this property. Any thoughts? This whole thing to me sounds ridiculous but I am concerned. i don't want to drag my Dad into this thing.