Trustee is Pursuing Ex-Spouse's Home as a Fraudulent Conveyance
My question involves bankruptcy in the state of North Carolina.
Hello,
I am being sued for my home by the Trustee on my wife's bankruptcy case. The situation is this:
In 2006, my wife and I separated. We did so amicably and drafted our own separation agreements where we distributed our property. Additionally, I quit claimed on the house we had been living and she quit claimed on the house we owned together as a rental. I never filed the quit claim deed for my house (the one that was the rental) because I had no idea I needed to do that. In 2010 my wife became insolvent and late last year she filed for bankruptcy. Since the loan for my house was still in her name, she included it in her bankruptcy filing. The trustee found that the quit claim deed was not filed until just before the bk filing--when her attorney said that I should file it. Now I am being sued and everyone tells me I will lose my house.
I am really desperate. I have been living in the house and paying everything fully and on time for 6 years. I have invested over $70,000 into it. Can it possibly be that over a technicality I could lose my one and only home? Can anyone think of anyway I may fight this? Help, please!!! The trustee is smelling blood because I owe $76k on it and he got a BPO that it could sell for $120,000. He has proposed that I let him sell it and he'll give me $15k. I cannot let him take my home from me, let alone for $15k.
Additional info: The divorce was finalized in 2008. The separation agreement included a paragraph where it said that my wife would transfer the deed of the house to me within one year. We thought she had done that by us signing and notarizing the quit claim deed.
Thanks for reading. Any help would be greatly appreciated. This is a matter of me ending on the street here.
Lou
Re: Trustee is Pursuing Ex-Spouse's Home as a Fraudulent Conveyance
the filing would not have effected the issue. The security interest in place for the loan remained in place, even after transfer. Due to that attachment, it could have been transferred and recorded 47 times and the bank would still be able to foreclose on the property if the loan was not paid.
the bankruptcy does not remove the security interest, only the indebtedness for the loan.
Re: Trustee is Pursuing Ex-Spouse's Home as a Fraudulent Conveyance
Jk,
Thanks again. You replied to my other post. I am not sure I understand. Or maybe I did not express myself correctly. The loan on the house was never NOT paid. The bank is not foreclosing on it. The trustee is saying that because I never recorded the quitclaim deed, that the house was never fully mine. So he wants to sell it for my wife's creditors, which I understand will get nothing since he hired himself as an attorney and is charging fees for his time in this case. Again, I have always paid the mortgage. The mortgage is current. The bank that owns the mortgage note is not involved in this at all.
Re: Trustee is Pursuing Ex-Spouse's Home as a Fraudulent Conveyance
Quote:
Quoting
zebraplayer
The trustee found that the quit claim deed was not filed until just before the bk filing--when her attorney said that I should file it.
By which I suspect you mean that the trustee confronted your wife and her lawyer about the fact that she was still a joint owner of the home, and they told you to file the quit claim deed without considering how the trustee might react - and his reaction was to suspect that she was transferring assets out of her estate to frustrate her creditors.
The quit claim deed was executed when? Was the execution witnessed by a notary or by an attorney?
Quote:
Quoting zebraplayer
The divorce was finalized in 2008. The separation agreement included a paragraph where it said that my wife would transfer the deed of the house to me within one year.
The settlement agreement was entered with the court as part of the judgment of divorce, back in 2008? That is, there's time stamped documentation in the court record that, under the property settlement, you were to get the house free of any claim by your ex-?
Re: Trustee is Pursuing Ex-Spouse's Home as a Fraudulent Conveyance
First, all this happened with my wife's BK's blessing. My wife had no intention of filing for bankruptcy except she thought creditors coming after her would be coming after me, because the mortgage to my house was still under her name. (We are in awesome terms her and I. We are better friends now than ever.) So she went and explained the situation to her bk attorney who told her that, "He (meaning me) will have no problem. Just have him file the quit claim deed before you file bankruptcy." She advised me of this and I filed immediately. At the time I was not too concerned, because I never in a million years thought that my ownership would be seriously questioned when I had been living in the house, paying all the bills, and I had a quit claim deed signed 6 years earlier.
During her bk hearing, my wife said that the trustee asked her about the loan on my property and she simply said, "That's my ex-husband's property". That that was that. She says she was literally five minutes in front of him and all was done.
A few months later, just before Xmas, I get the summons for the lawsuit saying that the transfer was made when my wife was insolvent (at the time of my filing of the quit claim deed) and that, therefore, the judge should avoid the transfer.
The execution was witnessed by a notary public.
No, the settlement agreement was never filed with the court. We signed it and had it notarized the same day as the quit claim deed (2006).
Re: Trustee is Pursuing Ex-Spouse's Home as a Fraudulent Conveyance
Quote:
Quoting
zebraplayer
few months later, just before Xmas, I get the summons for the lawsuit saying that the transfer was made when my wife was insolvent (at the time of my filing of the quit claim deed) and that, therefore, the judge should avoid the transfer.
We got that. The trustee is alleging fraudulent conveyance.
Now if you could answer my questions....
Re: Trustee is Pursuing Ex-Spouse's Home as a Fraudulent Conveyance
Sorry, I thought I did. Aren't these the answers to your questions:
The execution of the quit claim deed was witnessed by a notary public.
No, the settlement agreement was never filed with the court. We signed it and had it notarized the same day as the quit claim deed (2006).
Re: Trustee is Pursuing Ex-Spouse's Home as a Fraudulent Conveyance
You really need the assistance of an attny. The issues are too complex for an Internet forum.
1. Transfer occurred 6 years ago but the recording of the deed happened recently.
2. At the time of the transfer between you and your wife, you transferred a second home to her. The homes may or may not have been of comparable value.
3. Despite the recent recording you have been residing in the home, making the mortgage payments, claiming the interest deduction, keeping up the property etc. You may be the equitable owner if not the “legal title owner” of the property.
A judge needs to wade through these and other issues.
Bottom line, you need to defend the suit so that you can get into a position to settle. The Trustee does not want to sell the property. He wants $$$$. It’s called extortion. Find and hire an attny who knows how the game is played - this screams "settlement".
Des.
Re: Trustee is Pursuing Ex-Spouse's Home as a Fraudulent Conveyance
Quote:
Quoting
zebraplayer
The execution of the quit claim deed was witnessed by a notary public.
Quote:
Quoting zebraplayer
We signed [the settlement agreement] and had it notarized the same day as the quit claim deed (2006).
The notaries should have records confirming the date that the documents were notarized.
I agree with despritfreya that you should retain a lawyer to represent you in the bankruptcy court. Your lawyer can review your settlement agreement, as well as the divorce judgment to see how it was referenced in the judgment, to try to establish that this property distribution dates back to 2006, and that the home was in fact awarded to you as part of the divorce. Your lawyer can seek documentation to confirm the date of the execution of the deed. Your lawyer can attempt to rebut any claim by the trustee that, due to the late recording, creditors may have a claim against the real estate. Etc.
Re: Trustee is Pursuing Ex-Spouse's Home as a Fraudulent Conveyance
Thank you Des and Mr. Knowitall. I have called many attorneys and they all say that they will represent me but that the case is a loser. The problem is I have not worked in 6 months and I am looking to see if there is even a good argument to justify paying and attorney when they are all telling me I will lose. Why pay to lose a case?
My ex-wife's BK attorney called the trustee and was told that he wants $15,700 to settle the case. I know that he wants me to settle. Like I said before he smells blood. The difference between what I owe on the house and what it might sell for allows for a good profit for him. Unfortunately, I do not have the $15,700 that he wants. Not even close.
Could someone interpret this for me?
"The registration of deeds is primarily for the protection of purchasers for value and creditors; an unregistered deed is good as between the parties and the fact that it is not registered does not affect the equities between the parties. Patterson v. Bryant, 216 N.C. 550"
Would that apply to my case or (because of the "creditors" part) does it actually say the opposite of what I need it to say?