Can I Transfer Real Estate Before Bankruptcy?

You can transfer real property before bankruptcy, but there are rules, and the transaction will be carefully scrutinized by the bankruptcy trustee. The main consideration if you transfer your home or other real estate in advance of a bankruptcy filing will be whether you sold the property for fair market value. Certain types of transfers before bankruptcy will likely be considered fraudulent. For example:

• If you gave your home or other real estate to a family member or friend before filing bankruptcy
• If you sold your property shortly before bankruptcy for less than the property was worth

In fact, similar property transfers may be found to be fraudulent even if the transferor doesn’t file bankruptcy–for example, if the property is transferred in an attempt to protect it from a creditor.

A case that played out right here in our own U.S. Bankruptcy Court for the Central District of California and the Orange County and the Orange County Superior Court shows just how badly wrong the effort to hide property from creditors in bankruptcy can go.

How a Feud Between Neighbors Turned Into Bankruptcy Fraud

Catherine Cass and her neighbors didn’t get along. All the way back in April of 2004, the Wallaces and another neighbor sued Cass for defamation and nuisance. According to the neighbors, Cass blared music late at night and made other loud noises intended to disturb the neighbors, took her dogs to the neighbors’ front lawn to defecate and sent the dogs into the back yard to frighten the neighbors’ grandchildren by snarling and hurling themselves at the fence between the yards.

The neighbors also said Cass put up several signs defaming them, including allegations that they abused elderly people and had intentionally poisoned her plants. One said “Milosevic Next Door,” and Cass accused the neighbors of discriminating against her because she was Jewish.

After Being Sued, Cass Transferred Her House to Her Daughter

About one month after the Wallaces filed suit, Cass transferred the deed to her house to her daughter, Christine. She did not receive any payment for the transfer, and did not move out of the house. Instead, she transferred a “remainder” interest to Christine, while reserving a life estate for herself. In simple terms, that meant Cass no longer had the legal right to sell or otherwise transfer the property, but she could live in the house for the rest of her life.

Christine also agreed to deed the property back to her mother upon request.

Cass Files for Chapter 13 Bankruptcy

About a year after transferring the property, while the lawsuit against her was still pending, Cass filed for Chapter 13 bankruptcy. Because the automatic stay in bankruptcy prevents any collection action, Cass’s bankruptcy filing paused the lawsuit against her. However, that didn’t last long. The bankruptcy court dismissed her bankruptcy petition, finding that it was filed in bad faith.

The Neighbors Sue to Set Aside Transfer of the House

As soon as the bankruptcy case was dismissed and the automatic stay terminated, the neighbors filed another lawsuit asking the court to set aside the transfer of Cass’s house to her daughter. They argued that she had transferred the property to prevent them from collecting any judgment they might secure against her.

Their original lawsuit also began moving forward again. A few months later, the neighbors won a $320,000 judgment against Cass. That judgment included $75,000 in punitive damages based on the effort to transfer the property to avoid any judgment entered in the case. Cass appealed and lost. But while her appeal was moving forward, she filed for Chapter 7 bankruptcy.

The Orange County court then ruled that the transfer of the property was void. Legally, Cass was still the owner of the property, and that made it fair game for creditors to collect against. She appealed, but passed away before the case was decided–she’d literally spent the rest of her life trying to protect the fraudulent transfer of her property.

If the appeal had been decided in Cass’s favor, the house would have belonged to her daughter, since her life estate terminated when she died. But the appellate court agreed that the transfer was fraudulent and was void. The house became the property of Cass’s bankruptcy estate, and her bankruptcy trustee sold it to pay her creditors–including the neighbors.

The Bottom Line on Fraudulent Transfers

Like many people being pursued by creditors or considering filing bankruptcy, Cass thought she had a clever plan for concealing her assets. Across 8 years, two lawsuits, and two bankruptcy filings, that plan failed spectacularly. If you’re facing problems with creditors and fear that your home or other assets may be at risk, your best next step is to talk to an experienced debt resolution lawyer.

Better Protection for Los Angeles Homeowners Today

If Cass’s situation had been playing out today, her machinations might have been unnecessary. That’s because a few years ago, the California legislature dramatically increased the homestead exemption in bankruptcy. In 2026, the California homestead exemption is between $371,547 and $743,459. That’s the amount of equity in your home that you can keep even when creditors are attempting to collect on your debts or you file for bankruptcy.

If you’re struggling with debt or are concerned about losing property due to a large debt or a judgment against you, talk to one of your experienced Los Angeles bankruptcy lawyers today. Call 877-439-9717 today, or fill out our contact form.