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10 year look back for fraudulent transfer in bk


rabbit
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Before you spend your hard earned money to file chapt 7 bk, please be aware that there is a new 10 year look back for fraudulent fund conveyance, In essence, if you have, overthe past 10 years, used money that could have been used to pay creditors and instead used it to purchase a home, that money and your home are in jeporady,, My lawyer neglected to tell me this until I paid all the fees and then said "Wow, I saved your house by discovering this new law in the bankruptcy law",...did he give my money back? Of course not, he's a lawyer and consumers are their ATM machines..OH, he did say that the chance i would lose my home was only about 30% Gee, only 30%

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I think your attorney may be looking at the 10 year homestead reduction look back (used by trustee at the time of valuation) and confusing it with the 2 year fraudulent transfer look back. It would seem oppresive to me that a discharged debtor would have to look over their shoulder for 10 years wondering if they'll "get caught" or not.

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FRAUDULENT TRANSFER LOOK-BACK RULE INCREASED TO TWO YEARS

A bankruptcy discharge may be denied if the debtor has made a fraudulent transfer or a preferred insider transfer within two years of filing bankruptcy. The old rule denied fraudulent transfers made within one year of filing bankruptcy, and did not prohibit insider transfers. Most states have significantly longer fraudulent transfer periods that can cause assets transferred before a bankruptcy to be set aside, but this will generally not result in loss of the bankruptcy discharge.

A fraudulent transfer is defined under the Bankruptcy Code as a debtor’s transfer to a creditor of the debtor with the actual intent to hinder, delay, or defraud any creditor of the debtor.1 A fraudulent transfer also encompasses a debtor’s assumption of a creditor’s obligation instead of making a transfer. If a debtor makes a transfer to a creditor and does not receive equivalent value, a fraudulent transfer exists if (1) the debtor’s business (or impending business) held assets unreasonably low in value; (2) the debtor incurred or believed it would incur debts beyond what the debtor could repay; or (3) at the time of the transfer, the debtor was either already insolvent or became insolvent as a result of the transfer.

Although the new two-year rule applies with respect to fraudulent transfers to bankruptcies filed on or after April 20, 2006, the new prohibition of insider transfers became effective immediately upon President Bush signing BAPCPA into legislation on April 19, 2005. The new prohibition of insider transfersis defined under the Bankruptcy Code as: a transfer made by (or obligation incurred by) the debtor to (or for the benefit of) an insider3 under an employment contract and which was not in the ordinary course of business and for which the debtor did not receive reasonably equivalent value in exchange.

HOMESTEAD PROTECTION

The “mansion loophole closing” provisions of BAPCPA will reduce the protected homestead equity value to as low as $125,000 if one of the three exception provisions (summarized below) applies:

1. The entire value of homestead property will not be protected where its value has been increased by a disposition of non-exempt property made by the debtor during the 10 years prior to filing bankruptcy with the intent of hindering, delaying, or defrauding creditors.7

The reduction is based upon the value of the homestead resulting from such “fraudulent transfers.” The courts must determine how to apportion appreciation in the value of a homestead that occurs after the “fraudulent conversion” has occurred.....

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I so hope your are right.. That way I have only p----d away my attorney fees, etc. rather than another 8 years of worrying... I have googled this and found the 10 year reference in the new bankruptcy laws.. thanks, I still hope you're right....I got the info from an attorney named Blinn in Florida and all he does is chapter

7's...rabbit....

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Before you spend your hard earned money to file chapt 7 bk, please be aware that there is a new 10 year look back for fraudulent fund conveyance, In essence, if you have, overthe past 10 years, used money that could have been used to pay creditors and instead used it to purchase a home, that money and your home are in jeporady,, My lawyer neglected to tell me this until I paid all the fees and then said "Wow, I saved your house by discovering this new law in the bankruptcy law",...did he give my money back? Of course not, he's a lawyer and consumers are their ATM machines..OH, he did say that the chance i would lose my home was only about 30% Gee, only 30%

I think your lawyer is a BS artist. Were I you, I'd find new counsel immediately.

There is absolutely no law that says you must pay debts before buying a home.

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Thank you very much for your input.. The problem, the BK atty told me, was that I took the money from what was left of my IRA and put it in my checking account, so that I could pay for a modest house..His explaination is that "that could be construed as fraudulent transfer..." (from my IRA, to my checking acct, to the title company, all within 48 hours).

Kenny and Jeff, burn in hell....(sorry.....no, I should say, "congratulations to those of you not familiar with ENRON"). rabbit

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He's wrong.

One factor in a fraudlent transfer is, did it leave you insolvent. In your case, it's a nonevent. The equity in your home is exempt in Fl. and, ERISA qualified retirement accounts are exempt as well.Your creditors could never have gotten your IRA anyway.

BTW, his advice flies in the face of a recent Fl. Bk court decision.

http://www.bankruptcyorlando.com/2007/03/new_residents_i.html#more

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Thanks Bingo. The way it was explained to me was that; I made my IRA a non protected asset the day it was transfered to my checking acct. BTW..I have used the Alper site to do some research and I believe he had a post talking about the 10 year...I have two calls in to BK attys, Hopefully get a call back, get some better advice and make an attempt to get some of my money back....thanks...rabbit

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I made my IRA a non protected asset the day it was transfered to my checking acct.

That is correct - your checking account is not a qualified retirement plan under the law - its liquid cash.

Buying a house is hardly a 'fraudulent transfer', either. I'm with Bingo on this, the guy's handing you a line of baloney.

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That is correct - your checking account is not a qualified retirement plan under the law - its liquid cash.

Buying a house is hardly a 'fraudulent transfer', either. I'm with Bingo on this, the guy's handing you a line of baloney.

Thanks, I have not received any return calls from BK lawyers yet. Hopefully on Monday/Tuesday.. I think the way he will justify what he said was, he said "you stand a 30% chance of losing your home...you have to decide if you want to take that chance." When I googled the new BK law, their was some discrepancy on this 10 year thing...,so I took his word for it and decided to tough it out...and tough it is....thanks again.........rabbit

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  • 3 months later...

Rabbit,

a couple of things were discussed this week in my bankruptcy class that may be of interest or use to you. Apparently there is a move by creditors to extend the 2 year "look-back" period given to the BK trustee by 11 U.S.C.A. sec. 548. They are using section 544(B)(1) that allows the trustee to avoid any transfer of an interest of the debtor in property....that is voidable under applicable law by a creditor holding an unsecured claim...

The key here is that now we have to look to see if we have any voidable transfers under state law. One area of growing importance is the Uniform Fraudulent Transfers Act. All states have passed a version, but with differences in certain areas. Your state may vary, but more or less, it gives creditors the right to reverse or lay claim to property involved in certain transactions where the creditors claim they have been defrauded, whether it be constructive or with intent.

This is constructive fraud, no intent needed...

SECTION 5. TRANSFERS FRAUDULENT AS TO PRESENT CREDITORS.

(a) A transfer made or obligation incurred by a debtor is fraudulent as to a creditor whose claim arose before the transfer was made or the obligation was incurred if the debtor made the transfer or incurred the obligation without receiving a reasonably equivalent value in exchange for the transfer or obligation and the debtor was insolvent at that time or the debtor became insolvent as a result of the transfer or obligation.

UFTA SoL for 5(a) claims:

SECTION 9. EXTINGUISHMENT OF CLAIM [sTATUTE OF LIMITATIONS].

A [claim for relief] [cause of action] with respect to a fraudulent transfer or obligation under this [Act] is extinguished unless action is brought:

(a) ...

(B) under Section 4(a)(2) or 5(a), within 4 years after the transfer was made or the obligation was incurred...

So, the "look back" period, if a creditor petitioned to use UFTA (5)(a) under the 544(B)(1) state law exception, could be as much as 4 years.

I've reread section 548(e)(1), and I cannot for the life of me see how your attorney could construe your situation as challengable under the 10 year look back rules that require ACTUAL FRAUD, among other specific requirements.

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First....thanks for the update... secondly, IMO he knew the transfer could be challenged, even if there was no fraud or intent to defruad and he didn't want to deal with it. His office is a chapter 7 mill and my application may have caused a ripple by having someone take some time to do some actual research.

I have since, added DW to my warranty deed and eventually will file.

My thanks again for your research and response....rabbit

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