(PRWEB) May 12, 2015
The changes to the Bankruptcy Code in 2005 (Pub.L. 109–8, 119 Stat. 23, enacted April 20, 2005) brought potential traps for Debtors who are trying to protect their assets like house. Putting a large down payment on a house or paying a large amount to reduce the mortgage principal could put the Debtors in a precarious position of losing that money.
Changes to the Bankruptcy Code allow a Chapter 7 Trustee to reduce the protected equity in a homestead or even remove the exemption protection in full (11 U.S.C. § 522(o)). The Trustee has to prove that the money put into the house was done with the intent to delay, hinder or defraud creditors.
The Bankruptcy Code now allows a Chapter 7 bankruptcy Trustee to review the financial transactions like a down payment or principal reduction in a homestead over the past ten years. Texas has one of the most generous homestead exemptions in the United States, but even that exemption can be severely limited or even reduced completely if the Trustee's allegations are proven true. Below a brief summary of the Robert Louis Van Erem III v. U.S. Bancorp Investments Inc., bankruptcy case is given. The complete Memorandum Opinion of Bankruptcy Judge in the Busby & Associates client's case (Robert Louis Van Erem III) can be obtained from the document link given below.
According to Re: Robert Louis Van Erem III, et al Debtor (s) (Case no.: 14-35191) filed in the United States Bankruptcy Court for The Southern District of Texas, Houston Division on 03/18/15 by the petitioner (Robert Louis Van Erem III), the honorable Court had to adjudicate whether the funds utilized by the petitioner to purchase the Van Erems' home in Katy, Texas was done with the intent to hinder, delay, or defraud any creditor or not. The proceedings of the case was based on the application of 11 U.S.C. § 522(o). The Court's final decision was primarily based on the precedence set by the two cases: In re Addison, 540 F.3d 805 (8th Cir. 2008) and In re Cipolla, 476 Fed. Appx. 301 (5th Cir. 2012). The Honorable Marvin Isgur (United States Bankruptcy Judge) after analyzing the case w.r.t. badges of fraud, facts, credibility of the witnesses presented, and the applicable bankruptcy law concluded that, “the Van Erems did not act with the intent of hindering, delaying or defrauding a creditor.” (http://www.gpo.gov/fdsys/pkg/USCOURTS-txsb-4_14-bk-35191/pdf/USCOURTS-txsb-4_14-bk-35191-0.pdf)
After the trial, Busby & Associates commented, “Busby & Associates will fight to protect its clients. Unfortunately, not every bankruptcy attorney will fight to protect his/her clients from losing assets to a bankruptcy trustee. It takes a lot of work. It takes a lot of time. There are times to settle. This was not one of them. We are glad we could help our clients in protecting the equity in their house.”
It's evident from the case in question that any large financial transactions done before filing for the bankruptcy protection could lead to potential problems. There are numerous examples of people who lost their houses in bankruptcy. This is why it is imperative to consult with an experienced bankruptcy firm before you file. Full disclosure of all your past financial transactions with your attorney is also quite important.
(In Case No: 14-35191 In Re Robert Louis Van Erem III (a debtor) In the Southern District of Texas Houston Division, with the Honorable Judge Marvin Isgur presiding,(http://busby-lee.com/bankruptinfoblog/save-house-equity-from-seizure/)
In re Van Erem, No. 14-35191, 2015 WL 1293525, at *1 (Bankr. S.D. Tex. Mar. 18, 2015) the debtors had moved to Texas more than two years ago before filing for bankruptcy.)