Legal Question in Real Estate Law in California

does anyone have the answer to this question?

I will be filing for chapter 7 very soon and i was wondering if I were to quit claim a rental property to my parents prior to filing, is that legal? Also there is a HELOC on that rental property which was going to be included with the chapter 7. If i include the HELOC in the ch. 7 would they be able to take the property? Or does the chapter 7 protect that?


Asked on 5/15/08, 1:10 pm

3 Answers from Attorneys

Mitchell Roth MW Roth, Professional Law Corporation

Re: does anyone have the answer to this question?

A transfer of assets in anticipation of filing Chap 7 is a fraud on creditors and avoidable. A HELOC is a secured loan and the asset is available to repay the loan even in Chap 7.

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Answered on 5/16/08, 11:53 am
Cathy Cowin Law Offices of Cathy Cowin

Re: does anyone have the answer to this question?

Bankruptcy law provides for a "preference period" prior to filing. If you transfer property around to avoid creditors during this period, the court can undo the transactions by claiming they were fraudulent. If you are able to hold off for the preference period in filing the bankruptcy, you may be able to implement strategies to preserve assets. You should talk to a bankruptcy attorney in your area about pre-bankruptcy asset preservation strategies as soon as possible.

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Answered on 5/15/08, 1:40 pm
Bryan Whipple Bryan R. R. Whipple, Attorney at Law

Re: does anyone have the answer to this question?

Transferring property for less than fair value to avoid, delay or hinder existing or prospective creditors is fraudulent, with or without a bankruptcy proceeding, and the statute of limitations is lengthy.

Bankruptcy will not prevent loss of the property; it may delay it and change the forum from a trustee under a deed of trust to a trustee in federal bankruptcy court, but the result will not be very different, just more expensive.

A personal bankruptcy will affect everything you have, as will a judgment for fraudulent transfer. A foreclosure usually doesn't reach beyond the foreclosed asset, although in somewhat unusual circumstances a lender can seek and obtain a deficiency judgment if a foreclosure sale in a judicial foreclosure doesn't produce enough cash to pay off the foreclosing lender.

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Answered on 5/15/08, 3:35 pm


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