Alan Scores Major Victory in Bankruptcy Case

Alan recently secured a favorable decision for a creditor client in a case in the U.S. Bankruptcy Court in Rhode Island that involved misconduct by the debtor.

The debtor,  himself a bankruptcy attorney, filed for bankruptcy in early 2010.    He listed among his assets a four-unit apartment building in Lincoln,. Rhode Island.    He also indicated that the mortgage on this property was held by a trust bearing the same last name as his.

Alan attended the meeting of creditors,  where he examined the debtor under oath as to the mortgage.     The debtor testified that his mother had loaned him money to buy the building.   However,  he also testified that he had not made any payments on the mortgage in more than 20 years,  that his mother had never demanded payment from him, and that when he went to pay his mother,  she refused to accept the payments.

In view of this bizarre testimony,  Alan conducted a title search on the property and found that the deed to the property had been transferred by the debtor and his former wife to the debtor’s mother approximately one week after the filing of the debtor’s bankruptcy petition (the debtor later explained that he had signed the deed some 10 years earlier pursuant to his divorce agreement with his ex-wife,  but that the ex-wife hadn’t gotten around to signing and filing the deed until after she had learned of the debtor’s bankruptcy filing).    Alan brought this transfer to the attention of the bankruptcy trustee, who promptly brought a lawsuit to void the transfer and to have the mother’s mortgage declared to have been either discharged or a gift.

With this wall of negative information crashing down around the debtor,  he amended his bankruptcy schedule to add an exemption for a $300,000 homestead on the Lincoln property.   Alan and the trustee immediately objected,  and in their objections argued that the debtor’s misconduct and dishonesty about the mortgage and the post-petition transfer should render him ineligible to add the homestead protection.

Although the applicable law generally allows bankruptcy schedules to be amended to add a homestead exemption,  in this case the court found that the debtor’s conduct was characterized by bad faith,  and both Alan’s client and the trustee had expended substantial efforts prior to the amendment of the schedules such that the amendment would be prejudicial to their respective interests.   The court agreed,  and the debtor’s property will be sold by the trustee free of the homestead (though the issue of the validity of the mother’s mortgage will have to be determined by the court through a trial).
Contact Greater Boston Real Estate Deposit Dispute Lawyer, Attorney Alan Fanger

Attorney Alan Fanger is a Massachusetts real estate litigation attorney with offices in Wellesley. He serves the entire Greater Boston and Boston metrowest region including Arlington, Boston, Braintree, Brookline, Cambridge, Canton, Concord, Dedham, Dover, Framingham, Lexington, Milton, Natick, Needham, Newton, Norwood, Quincy, Sherborn, Sudbury, Waltham, Wayland, Wellesley, and Weston, Massachusetts.

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