Legal Question in Civil Litigation in California

If you did not pay full value for it, then it may be deemed a fradulent transfer to avoid creditors. She should defend the suit agressively. Contact me directly.

Depending on when the conveyance occurred, it could be considered a fraudulent conveyance. In order for a transaction to be a fraudulent conveyance, the trasferor must have made the transfer with the intent of depriving her creditors of the asset and the property was sold or transferred for less than its fair value. If your sister does not file bankruptcy, the credior would first have to get a judgment against your sister and then file a lawsuit against you to convey the property back to your sister (you would be entitled to receive any money back you paid your sister for the property). The statute of limitations for the creditor to bring the lawsuit is generally 4 years from the time the property is conveyed, but could be longer, depending on the circumstances. If your sister does file bankruptcy, then the trustee in bankruptcy may bring an action against you for a fraudulent conveyance if the conveyance happened within 4 years of the filing of the bankruptcy petition. To defend a fraudulent conveyance lawsuit, you would have to show that you acted in good faith and paid "fair value" for the property. Fair value could be as simple as a promise to take over payments, but not necessarily.

As an alternative, you could put the property up for sale, spend the money and then file bankruptcy if you are sued.

As Ocean Beach unhelpfully mentions to scare you into contacting them directly, but does not explain, there is a doctrine in Bankruptcy Law that has a counterpart in the California Civil Code that gives a bankruptcy trustee or a creditor the right to bring an action to recover property that a debtor has transferred to another person IF one of two things is true: either a) the transfer was made with the purpose and intent of hindering, delaying or preventing the creditor(s) of the transferor from collecting what they are owed; OR b) the transfer is made without equivalent exchange of value AND the debtor is insolvent at the time OR the transfer makes the debtor insolvent. In simpler terms that means that they can reverse the transfer if it was done to try to put the asset out of the reach of your sister's creditors, OR regarless of the intent, if it was made without fair payment when her debts were more than her assets, or her debts were more than her assets after the transfer. So the $64,000 question is whether any of those circumstances apply to your situation. Also, even if the transfer was reversed, the creditors would only be able to reach your sister's interest in the property as if she hadn't transferred her share to you. So the worst case scenario is you become co-owners with the creditors instead of your sister, and you have to work something out with them about how to deal with that.