Property Transfers in Arizona Bankruptcy
In re: Mortensen, No. A09-90036-DMD (Bankr. D. Alaska, May 26, 2011).
Sometimes, people who file bankruptcy need to wipe clean their debts, but fear losing some valuable asset. In order to avoid losing their car or their home, they try to hide the asset or make it unavailable to the court.
A trust is a legal way some people attempt to make their property unavailable. Most trusts allow someone to not legally be in possession of property. By transferring property to a trust, they are no longer the owner of the property. However, if you do this to keep assets from your creditors when you file for bankruptcy, the bankruptcy court may decide that the property actually still belongs to you, and will be used to pay creditors.
In this case, an individual filed for bankruptcy after placing $50,000 worth of land into a trust. He hoped that, by doing so, he could wipe clean his debt without losing any personal property. However, the bankruptcy court found that he had transferred the property to the trust for the purpose of defrauding those who owed him money. As a result, he lost his property in bankruptcy. If he had not hidden it, he may have been able to keep it by claiming it as exempt.
If you are worried about the exempt status of your Arizona property, it is always the best option to discuss your personal situation with a qualified local bankruptcy attorney.