Legal Question in Bankruptcy in Minnesota

Bankruptcy

in 2005 we sold some property and paid off a loan that was tied to the house. It was a line of credit, and not a first or second mortgage.

We also paid of big credit cards with the remaing money. There were still some small credit cards remaining that did not get paid off.

We talked to an attorney to pursue bankruptcy 5/2007 and she says we committed an illegal transfer of funds from non-exempt to exempt.

What does this mean? Can we still pursue the bankruptcy. In 2005, we did not know we would have to file, and we did not know we shouldn't of paid this loan off with funds from a property sale.


Asked on 5/29/07, 2:19 pm

1 Answer from Attorneys
David Kelly-952-544-6356 Kelly Law Office

Re: Bankruptcy

First of all let me tell you this: That was a mortgage that you paid off. If it is a line of credit "tied to the house," that's a mortgage. The sales people who sell those loans don't want you to know that. They even have my wife fooled, and it's hard for me to explain to her that yes that is really a mortgage.

That said, the section of the bankruptcy act that applies to this situation is 11 United States Code Section 522(o). I suggest that you look it up and read if for yourself. It does include language saying that the transfer had to be with "intent to hinder, delay or defraud a creditor ..."

So if you were to still try filing a bankruptcy your lawyer would have to try to reconstruct your circumstances at the time that loan was paid off and be ready to argue that you were solvent at the time and that it was not done to hinder or defraud anybody.

The problem this creates for you is that if you try to file a bankruptcy, you have to expect to do battle over this issue; which is very sad.

I wish I knew the exact amount of the loan payment you made, and how that compares to the debt you would like to run through the bankruptcy.

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Answered on 5/30/07, 1:20 pm


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