In a bit of an odd case (is this an omen for the year ahead?) from Western Massachusetts, bankruptcy judge Henry J. Boroff ruled that a non-filing wife couldn’t sue her husband’s lawyer for malpractice — at least not in the bankruptcy court. Massachusetts state court, well, that could be another story! The case is In re Surprise, 09-03056, decided January 14, 2011.
It all started in 2006 when the husband Donald transferred his interest in their house to his wife, Judith, for $10.00. This was supposedly done because the couple was about to divorce (although they never did). If you are considering bankruptcy, repeat this about 1,000 times: It is NEVER a good idea to transfer property to a relative for a low sum of money before you file. There probably isn’t a bigger “red flag” in the bankruptcy world, and every trustee in the whole country is on guard for it.
Anyway, Donald later filed a chapter 7 case, and, no surprise, it wasn’t long before the bankruptcy trustee went looking to undo this particular transaction. Now Judith wants to blame Donald’s lawyer for giving “bad advice.”
But Judith found she had more legal problems when she went to bankruptcy court to sue. She wasn’t the actual client of the law firm (Donald was) so she was on shaky ground jurisdiction-wise, and the bankruptcy court refused to get involved.
But please remember the moral of the story: It is NEVER a good idea to transfer property to a relative for a low sum of money before you file! Can’t say it too many times . . . .
By Doug Beaton