No good deed goes unpunished

What began so simply in 1998 as a couple’s intent to help their struggling daughter establish a home has resulted in a bankrutpcy court nightmare that continues to this very day.

In that year Kenneth Duda and his then wife purchsed a two family home in Northfield, Massachusetts with the intention that their daughter Pamela would live in one of the units. The parents took title to the property, put up the down payment and took out the mortgage intheir own names; the daughter lived in her unit, rented the other,and paid as many of the bills as she could with her income and the rental income.

Eventually, Pamela’s problems reached the point where she filed a Chapter 7 bankruptcy case in Massachusetts. Not believing she was the “owner” of the house, she didn’t list it on her bankruptcy petition when she filed in 2005.

However, her father Kenneth was also contemplating bankruptcy, and he filed a Massachusetts Chapter 7 case in 2007. Because of several refinancings through the years, he believed Pamela owned the property, so he didn’t disclose it either. And to top it off Pamela attempted to transfer her share of the property to her father with a poorly written deed that was dated the very same day Kenneth filed his bankruptcy case.

Did this cause a bit of trouble? Well, you bet it did! The chapter 7 trustees for both father and daughter both claimed rights to the house, and they both sued the debtors as well as the mortgage company (Bank of America), who was also drawn into the fray. Allegations of fraud filled the air. The trustees bickered in court over who should get how much of the house. Pamela’s “simple” case from 2005 was re-opened.

Kenneth died; Pamela took the Fifth. The case streched on until 2010. Now U. S. Bankruptcy Judge Henry Boroff has ruled that the father’s bankruptcy trustee has a 50% share in the property which he can auction off to pay creditors. Barring further litigation or appeals, that may happen soon. The case is In re Duda, and was decided on January 15th.

For prospective bankruptcy clients, the take-away is this: when real estate is involved, you can never be too careful. Talk with you attorney about all the property you own, from the humblest timeshare to the grandest mansion, and if bankruptcy might be an option for you, don’t try to sell it or give it away without getting good legal advice first.

 

By Doug Beaton

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