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Property transfers pursuant to final decree of divorce

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    Property transfers pursuant to final decree of divorce

    So on your bankruptcy paperwork it asks you to list any asset transfers that occurred within the last 2 years. My question is how does this relate to property transfers associated with divorce? When I filed my paperwork, I gave my lawyer a copy of the divorce decree and the associated lawsuit is listed on the filing. What didn't get listed was that the ex took one of our cars (paid off) and a huge chunk of cash. Will the trustee get pissed off that those asset transfers were not listed explicitly on the schedules? Can the trustee possibly try to undo transfers that occurred as the result of a Divorce Decree. The final Decree landed just barely within 90 days of the bankruptcy filling. I would find it delightfully poetic if the trustee clawed back some of then money that my ex got (which I really considered to be rightfully mine), but all things considered, I would rather not involve her in the whole thing.

    Can payments or property transfers to an ex-spouse be considered preferential payments or fraudulent transfers? Will the trustee get pissed if these payments and transfers are not explicitly listed on the bankruptcy filing? As I said, my lawyer knows about all this stuff but doesn't really seem concerned. I hope the trustee is as laid back as he is.

    #2
    Just to show I'm not completely lazy... I found this online which seems to suggest that property transfers involved with a divorce decree are usually not undone by a trustee provided that the divorce is not a fraudulent effort by both parties to put assets beyond the reach of creditors. i.e. a cooperative divorce between a couple that does not actually intend to divorce or possibly just an extremely one sided divorce settlement.

    12. PROPERTY TRANSFERS: THE PREFERENCE PROBLEM • The division of assets prior to a bankruptcy may be considered a “preference” in violation of §547 (1 year look back from insiders) or a fraudulent transfer in violation of §548 (2 years under Code, 4 year look back under UFTA). • Some courts conduct a “surface determination” asking are the transfers contained in the 16 settlement agreement a reasonable reflection of what would have happened at trial? In re Dunham, 2000 WL 33679421 (Bankr. D.N.H.)and In re Sorlocco, 68 B.R. 748, 753 (Bankr. D. N.H. 1986). • The Bankruptcy Code uses the term “reasonably equivalent value” which does not contemplate the equities of the parties. In re Hinsley, 201 F.3d 638 (5th Cir. 2000) (intangible benefits do not constitute reasonably equivalent value) See also, In re Neal, 461 B.R. 426 (Bankr. N.D. Ohio 2011) (debtor’s agreement to property division that favored former husband in exchange for avoiding litigation was not reasonable equivalent value); In re Perts, 384 B.R. 418 (Bankr. E.D. Va. 2008) (transfer to former spouse pursuant to marital settlement agreement fell outside reasonable range). However, in In re Bledsoe, 350 B.R. 513 (Bankr. D. Or. 2006), aff’d, 569 F.3d 1106 (9th Cir. 2009) the court held that a state court property division without evidence of fraud or collusion established reasonably equivalent value. • Cases that are tried are rarely (if ever) reviewed.

    Bankruptcy case with Richard Kent Harris in the southern district of Texas would be an example of a fraudulent divorce. The trustee filed an AP to deny a discharge and the case was later referred for criminal prosecution. Harris got sentenced to 10 months in prison and the "ex" wife was sentenced to 12 months house arrest.

    Short of actual fraud it looks like divorce related property transfers with stand up through bankruptcy? Is it still important to list the transfers explicitly on the forms? As I said, my attorney didn't seem too concerned about including the payments.

    Comment


      #3
      Transfers done pursuant to a valid domestic relations court order are not going to be reversed by a Trustee. A Trustee may inquire as to the "validity" of the divorce to make sure the parties were not trying to fraudulently remove property from the hands of a Trustee but that is rare.

      As to the disclosure of the transfer, I disclose all such transfers and state that such was done pursuant to a divorce decree. You may want to suggest to your attny that an amendment to question 18 of the Statement of Financial Affairs be filed.

      Des.

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