CAN BK TRUSTEE SELL DEBTOR’S FATHER’S HOUSE IF DEBTOR’S NAME IS ON TITLE?
楊清泉律師事務所
Sometimes parents put their children’s names on title to their residence even if the parents intend to keep the residence as their own as they continue to pay all expenses connected to their residence. The usual reason is for estate planning purposes of the parents. A major problem arises when the residence has a lot of equity and the children file for bankruptcy relief. The trustee will want to sell the property to realize the non exempt portion of the equity for the benefit of creditors. The parents will then argue that the residence belongs to them, not to their children. This becomes a major legal dispute. Parents will argue that their children own bare legal title while they, the parents own beneficial title, and that the house really belongs to the parents. Who is correct?
In Re Munro , the defendant was the father of the debtor wife. He acquired his home in 1985. Since then he was solely responsible for the payment of the mortgage on the property, as well as taxes, insurance, and maintenance costs. In other words, father paid for everything connected to the house. In 1993, as an estate planning device, the defendant added his daughter, the debtor’s name to the deed. The parties intended that the debtor would take only bare legal title to the property. They further agreed that the debtor would hold her legal interest in the property exclusively for the father’s benefit. So, the house is actually a property held in trust by the debtor for her father. Note that in bankruptcy law, a property held in trust by the debtor for another does not become property of the bankruptcy estate.
Debtor married her husband in 2004. In order to disclaim any interest in the property that he might have acquired by operation of law due to the marriage, the debtor husband quit claimed his interest in the property that he might have acquired by operation of law due to the marriage to the father and his wife, the daughter. After the couple filed for Chapter 7 relief in October 2010, the trustee filed an adversary proceeding against defendant father seeking authority to sell the property.
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In Re Munro , the defendant was the father of the debtor wife. He acquired his home in 1985. Since then he was solely responsible for the payment of the mortgage on the property, as well as taxes, insurance, and maintenance costs. In other words, father paid for everything connected to the house. In 1993, as an estate planning device, the defendant added his daughter, the debtor’s name to the deed. The parties intended that the debtor would take only bare legal title to the property. They further agreed that the debtor would hold her legal interest in the property exclusively for the father’s benefit. So, the house is actually a property held in trust by the debtor for her father. Note that in bankruptcy law, a property held in trust by the debtor for another does not become property of the bankruptcy estate.
Debtor married her husband in 2004. In order to disclaim any interest in the property that he might have acquired by operation of law due to the marriage, the debtor husband quit claimed his interest in the property that he might have acquired by operation of law due to the marriage to the father and his wife, the daughter. After the couple filed for Chapter 7 relief in October 2010, the trustee filed an adversary proceeding against defendant father seeking authority to sell the property.
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