How Bankruptcy Is Affected By Property Transfer In A Divorce
In a divorce the marital home is typically awarded to one part or the other. The transfer of the property will be ordered in the Judgment of Divorce. If you later file for bankruptcy, the Trustee appointed by the Bankruptcy Court will look to see if there has been a transfer of property within the six years prior to filing for bankruptcy. If there has been a transfer, the Trustee looks to see whether you received market value for transferring their interest in the property to the other party to the divorce.
One argument is that the transfer occurred pursuant to a Judgment of Divorce. But that is not the strongest argument, particularly if it was a Consent Judgment of Divorce. The best thing to do is to receive market value in the divorce in exchange for transferring your interest in the marital home. For example, the home is worth $400,000 and there is a $350,000 mortgage. That means the equity is $50,000. If in the divorce you receive $25,000 your interest in the property has essentially been “bought out” by the other party. It is not a good thing if you transferred your interest away for less than market value. See my article entitled, “Avoid Transferring Property Before You File For Bankruptcy.”
The above information is a general overview and is not intended to be used as legal advice. If you are considering filing for bankruptcy, the best thing to do is call our office at 248-557-3645 and schedule a free consultation so you can receive advice which is tailored to your specific circumstances.
By: Michael Benkstein, Esq.
Managing Attorney, Bankruptcy Department
The Law Offices of Joumana Kayrouz, PLLC
1000 Town Center
Southfield, MI 48075