Expert: Mark J. Markus- California Bankruptcy Attorney - 6/2/2011

Question
QUESTION: I live in California.  My husband and I gave our car (that is free and clear) to my daughter who is married and have two sons and live in Ga.  My husband is self-employed and had not worked for the past year.  This was in December 2010, when my husband drove to Georgia to visit them to check and see how they are doing and our two grandsons.  My daughter really had a hard time with her everyday chores, like doctor's appointments for the kids and hers as well, grocery shopping, etc.  While my husband was there, we have decided that we would just give the car to her which was actually our intentions from the very beginning she had our grandsons, because my son-in-law (he is in the military) works during the days, and they only have one car which he drives to work. We wanted our grandsons to have a reliable transportation since they live very far from us.  Just before my husband left GA, the title of the vehicle was transferred to both my daughter and her husband's name.  The next two months were getting tougher for us because my husband still has not found job. During the first part of March 2011, our company started laying off workers and my income was reduced 10%.  At the later part of March, I ended up finding a bankruptcy attorney and consulted her about my filing of bk. I have given her all documents needed including info about the car that we transferred to my daughter and son-in-law.  She said that it could be included as exempt asset.  At the bk hearing, the trustee indicated that was fraud and he asked that we have to come back for the next month's hearing.  He wanted us to provide him copy of the title of the car reflecting my daughter's and her husband's name, insurance to include his name as trustee, registration, and a dealer quote regarding the current value of the car. Will he try to recover this car from them?  What shall I do, I just want my daughter and my grandsons to have a reliable car for their use.  We had no intentions or never thought of even filing bk.  As much as possible I want to keep up with all our creditors and we even enrolled with a debt settlement company and we were able to settle two credit cards and one was in the process but discontinued due to our filing. Pls advise.

ANSWER: Unfortunately, the Trustee is correct.  The transfer of title to your daughter within one year prior to filing your bankruptcy case is, by definition, a fraudulent transfer.  The Trustee is entitled to sue to recover the value of the property transferred (i.e. the value of the vehicle at the time of transfer).  I'm sure you can reach a settlement with the Trustee to just pay cash at some discounted rate instead of turning over the vehicle.

Your attorney should have had you put title back in your name before you filed bankruptcy and then exempted the value.  That would have given you a better chance to protect it.

Mark J. Markus, Attorney at Law
Handling exclusively bankruptcy law cases in California since 1991.
http://www.bklaw.com/

---------- FOLLOW-UP ----------

QUESTION: You were right, as per my attorney, the trustee asked did for a settlement.  I have no choice but to gather the funds to pay the trustee.  I have another question, when I filed chapter 7, I have applied for HAMP loan modification.  I received my final loan modification from Chase in March.  The lender sent me the permanent loan modification agreement via fedex and had me signed two copies and were sent back to them via fedex.  After three weeks, Chase send me the signed and acknowledged agreement by Chase with their original signature.  My first payment was April 1 and on April 7 filed for chapter 7.  Would the filing affected my permanent loan modification?  Is it normal that I will not be receiving any monthly statement from Chase? I did make my May payment and will be making this month's.   Pls advise.

Thank you

Answer
The bankruptcy should not affect the loan modification, but it might depend on the exact terms of the loan.  It is common for banks to stop sending out monthly billing statements during a bankruptcy case.  You can usually get them to resume by having your attorney send them a letter requesting that they do so.