Summary:
In addition to a misstatement regarding their residency in the Western District of North Carolina, the Debtors failed to disclose in their Chapter 7 petition that they had transferred real property to their daughter within one year of their bankruptcy filing. Upon discovery by the Trustee (and likely facing avoidance of the transfer) the Debtors sought to convert to Chapter 13, amending their petition to include the transfer and also including additional income from the Female Debtor.
Beginning from Marrama v. Citizens Bank of Massachusetts, and then heavily relying on In re Goines, 397 B.R. 26, 30 (Bankr. M.D.N.C. 2007) and In re Southern, 2011 WL 1226058, at *3 (Bankr. M.D.N.C. March 29, 2011), the Bankruptcy Court held that, coupled with the other misstatements and non-disclosures, the “conversion is a transparent attempt to prevent the Trustee from recovering assets for the bankruptcy estate and to block the Trustee’s pending lawsuits against them and their daughter.”
Commentary:
Having been denied the right to convert, the daughter could still contest that the transfer is avoidable, arguing, as the Debtors contended here, that she was the equitable owner of the property. See for example: http://ncbankruptcyexpert.com/?p=1271
For a copy of the opinion, please see:
Jennings- Denial of Conversion from Chapter 7 to Chapter 13.pdf
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