Fraudulent Transfer into Homestead? Klinglesmith

The homestead protection under Florida law was restricted by BAPCPA. One of the major changes was to permit a chapter 7 trustee to recover against homestead if non-exempt assets were transferred into the home. Section 522(o) essentially superseded Florida law on this issue. This issue remains a major risk for debtor attorneys to avoid filing a case that risks losing the debtor’s home.

But the trustee or any creditor objecting to homestead must satisfy the proof requirements of Section 522(o) to establish that the transfer was made “with the intent ot hinder, delay, or defraud a creditor…” These cases are fact specific. In the recent case of In re Klinglesmith, 2011 Bankr Lexis 2230, (Bankr. M. D. FL. June 2, 2011), Judge Jennemann rejected the trustee’s objection. The debtor actually went on a “debt repayment spree”. The facts are too complicated to discuss here, but this is a case that should be reviewed whenever a case involves a large transfer of non-exempt to exempt assets. As a Ft. Lauderdale bankruptcy attorney, one of the first questions I ask of any new client involves what funds were used to purchase or upgrade a homestead.



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