[CLBS] Homestead Exemption

[Bruce M. Perry]

Debtors could not make the payments on their residence and were denied a
loan modification.  Debtors then obtained the lender's approval for a short
sale.  While the sale was pending, Debtors used $36,000 cash to purchase a
less expensive home where they could afford the payment.  The lender
discovered that the debtors had used the cash to purchase a new home and
therefore required the debtors to sign a note to proceed with the short
sale.  Debtors cannot afford to make the payments on the note and have tried
to negotiate a lower amount without success.  Debtor now wants to file a
Chapter 7 to discharge the note. 

 

Section 522(o) provides that if a debtor takes what would otherwise be
nonexempt property within a 10-year period prior to filing bankruptcy and
converts that nonexempt property into his homestead, the amount of the
homestead exemption will be reduced by the amount of that nonexempt property
if it was done with the intent to "hinder, delay, or defraud" a creditor.
Do you think that would apply in this case?   Any other issues to be
concerned about?

 

Any advice will be appreciated.

 

Bruce M. Perry

 

Integra Law Group 

950 W. Bannock, 11th Floor
PO Box 1870
Boise, ID 83701


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