Homestead Exemption /disposition of nonexempt assets to improve value

[Lisamlacy]

My ex disposed of nonexempt assets to improve the value of his home (which he was not living at at the time of filing chapter 13 and is trying to claim 125,000 homestead exemption. Basically, he hid $ that should have come to me for my divorce settlement and sunk them into an exempt asset in order to not pay me. I found this online and don't know if it is a state law or what but want someone to tell me if that translates to what he did and if you know the actual RCW for this quote?

"The value of the state homestead exemption is reduced by any addition to the value brought about on account of a disposition of nonexempt property made by the debtor (made with the intent to hinder, delay, or defraud creditors) during the 10 years prior to the bankruptcy filing."

The website it came from was:

http://www.bankruptcyaction.com/bankruptcyexemptions.htm

[DeadManCrawling]

That would be true in many but not all states.

Florida is one such. In FL, you can convert non-exempt assets up to day of filing and use the proceeds to pay down a homestead. The new law and federal homestead limits have not yet been fully tested in FL courts, though, so there may be an avenue to look at, if you are referring to a FL homestead.

I wouldn't expect much, though, and unless you are prepared to fund a case to FL Supreme Court and back, it may not be worth pursuing.

I am not familiar with anything outside of FL, and it does vary by state and even district as to how these things are interpreted.

[Lisamlacy]

It is in Washington State. We just had a 2004 exam for him and he stated thousands of dollars of improvements that probably increased the home value by the total amount allowed to be exempt.

[DeadManCrawling]

Even though the money was spent, the house didn't necessarily appreciate. Many people are discovering this the hard way when they try to sell. "Whaddaya MEAN my 40k kitchen renovation isn't worth 40k?!?"

I understand your position, and you should get something, if he spent the money for the sole purpose of avoiding his obligation. Unfortunately, the housing market may not be so helpful, if all you can go by is the appraised value.

There may be other ways of attacking this. Do you have an attorney working on it? What do they think?

I am unfamiliar with WA state law, so won't be able to offer up any constructive advice.

Good luck,

-dmc

[Lisamlacy]

Yes, I have an attorney, I just emailed him earlier today and asked about this issue, have not heard back. I guess my position is that there is $314k owed on the home and he has it listed for $399k, he is stating that basically all his improvements are the only reason he has equity...so this rule seems to apply perfectly?? The other thing is that he had not occupied the home for two months prior to filing and is living in a different residence as his primary residence, so what are the chances that it may not qualify for the exemption at all because of his living situation at the time of filing?? Would that make it to where the proceeds have to be paid into the plan? ....just a side note, he is not filing on any other debt besides my divorce settlement and is current with other creditors...

[DeadManCrawling]

I do not have answers for much or most of this.

However, he cannot file on SOME of his debts and NOT others. This is not opinion, and does not vary by state or district. It may be the legal opening you need.

If he filed BK and did not inform the court, via his schedules of these other debts, his filing is in bad faith or fraudulent. There is only one way the law looks at this.

If you KNOW he did not declare all of his debts, that opens a line of attack that can result in his filing being dismissed or, worse, he being charged with any number of crimes, should he not own up to all of the debts immediately.

How you would pursue this, I don't know, but your attorney should.

Have you shared this with your attorney, that he only listed your debt on his schedule (if that is what occurred-I may have misunderstood)?

Your attorney should be able to sort this out pretty quickly, as long as they have all the information.

[Lisamlacy]

He listed all of his debts, he is continuing to pay all of his other debts outside the plan and just paying me through the bankruptcy (that is what I meant) as well as trying to pay a debt he fabricated to his mother in order to dilute my payment. My lawyer pretty much has it sorted out that the debt to his mother is a bunch of crap. He admitted in the 2004 exam he had no documentation, didn't know an exact amount and couldn't account for the amount he wrote down on his schedules and that it was a verbal agreement with his mom over 5 years ago. My lawyer said there is a ton of inconsistencies and we are going after bad faith as he failed to disclose MANY assets and was caught in blatent lies on his taxes etc. But my lawyer says there is not one HUGE thing to jump out, just a ton of little ones. Seems to me like all the little things add up to a pretty big deal, but i'm no attorney. From what I understand they conclude bad faith on the totallity of everything?

[DeadManCrawling]

Your lawyer seems to have a good handle on things.

It sounds like your ex is within the law, based on what you posted.

Yes, the totality clause is invoked when the case is obviously egregious. It sounds like your ex is either well studied or lucky.

Given what you have said, I doubt there is much you can do to change anything, unless you are willing to spend 20k or more-and risk losing it-to file an AP based on this presumed fraudulent debt to his mother. I doubt you would win in any case.

Hopefully some others will add thoughts, but it appears your ex has followed the law nearly to the letter. If he has used it to hinder what should be yours, I am sorry to hear it, but do wish you well, and hope you find a way to make it right.