11 U.S.C. §§ 541, 548; Property of the Estate; Fraudulent Conveyance
Webster v. Cape, 2006 Bank. LEXIS 185 (Bankr. M.D. Ga. February 10, 2006)(Hershner).
Prior to the filing of his bankruptcy petition, the debtor’s mother died. Her will stated directed that the debtor could live in her home as long as he wanted, then the house would be sold and the proceeds divided between the debtor and his sister. The sister subsequently filed a Chapter 7, but did not list in her schedules her interest in the home as she apparently did not believe she owned an interest in the home. The debtor subsequently moved and, without consideration, transferred title to the home to his sister. At the time of the transfer, the sister’s bankruptcy case had been closed but the case was subsequently re-opened.
The debtor subsequently filed a Chapter 7 petition, and his trustee filed an action against the sister and her trustee to recover one-half of the interest in the home. The trustee of the sister’s estate cross-claimed against the sister to recover the other one-half interest for her bankruptcy estate.
Since the sister’s title to the home related back to the date of her mother’s death, her one-half interest was property of her estate and must be surrendered to the trustee of her estate. With respect to the fraudulent conveyance claim asserted by the debtor’s trustee, the parties agree that the transfer was made within one year of the filing of debtor’s petition and that the debtor received less than equivalent value, but disputed whether the debtor was insolvent at, or after, the time of the transfer. The court analyzed the debtor’s finances and determined that the transfer of his one-half interest rendered him insolvent under the Code’s balance sheet test. Therefore, the debtor’s trustee was entitled to recover the other one-half interest from the sister.