Car Title Determine's Chapter 7 Trustee Interest In Car Paid For Wholly By Debtor's Parents

Many parents put their children on title to the parents’ real estate, bank accounts, and cars for estate planning purposes. The parents want to give the children access to the assets in the event of the parents’ disability or death. Recent blog posts(see below)  have addressed problems this joint titling causes when the children file bankruptcy. The parents’ assets are subject to inclusion in the child’s non-exempt bankruptcy estate. In the case of jointly owned assets such as real estate or financial accounts the debtor children could take the position, if provable by evidence, that all the money that when in to the jointly owned real estate or financial accounts was the parents’ money so that the debtor child had no "equitable interest" in the property. If the child’s interest is limited to having their name on the account or deed with no financial investment, and the child can asset no rights or control in the asset, they may be able to protect the asset from a bankruptcy trustee.

This issue came up during a creditors meeting this past week for one of my Chapter 7 bankruptcy clients. In this case, a parent had purchased a car for cash and added the debtor/child’s name to the car title. The parents’ furnished all the money to purchase the car, and the parents’ paid for insurance. The Trustee rejected the debtor’s argument that this car was his parents’ car to be excluded from his bankruptcy estate. The Trustee said that car title is determined solely by the names on the title certificate and that there is no such thing as equitable ownership in a car. Therefore, the debtor could not sustain a position that he had less than 50% interest in the car as shown on the face of the car title.

I have not researched the issue, but I think the trustee’s position is legally correct. If the Trustee is correct the child’s 50% interest in the car will be part of the bankruptcy estate. The parents will have lost half of their equity in their car, and the parents or child will have to pay the Trustee half of the current car value or surrender the vehicle to be sold at auction by the Trustee. (in which case the parents would receive half of the sale proceeds). This example points to the pitfalls of estate planning by sharing ownership with children.

posted by Jonathan Alper, bankruptcy and asset protection attorney, Orlando, Florida 

Comments

[Declaring Personal Bankruptcy]

Thanks for the useful info..few words from myside...Chapter 7 bankruptcy may eliminate most kinds of unsecured debt. Some examples of unsecured debts are credit cards; medical bills; most personal loans; judgments resulting from car accidents; and deficiencies on repossessed vehicles. In addition to getting rid of your debt, you typically can keep all of your property.

[Nike air yeezy]

Having visited so many blogs, I am just attracted by your blog. Not only the rich content but also your unique perspective. Best wishes to you. by Nike air yeezy

[James Feuerstein]

Check out this case. I found it posted on Jordan Bublick's blog: http://jbublick.blogspot.com/

Transfer of Bare Legal Title Interest not a Fraudulent Conveyance
In the case of In re Moodie, ___ B.R. ___, 2007 WL 738435 (Bkrtcy.S.D.Fla.)(Raymond J.), the Court held that a prepetition transfer of bare legal title to an interest in real property was not a fraudulent conveyance.

When the involved real property was purchased, the seller listed debtor's mother and the debtor as grantees as joint tenants. The debtor only learned that the property was titled in her name at a later point. The Court found that the debtor's mother hired the real estate broker, signed the purchase agreement, paid the deposit, paid the balance due at closing, and paid all the expenses of ownership. The Court further found a lack of involvement by the debtor in the mortgage on the property. The debtor's mother testified that the debtor was titled on the property so that she would have rights to property in the event of her death. Prior to the bankruptcy, the debtor conveyed her interest in the real property to her mother.

Posted by Jordan E. Bublick, Bankruptcy Attorney at 6:09 PM

Labels: Bare Legal Title, Fraudulent Transfers