Q: Wondering if transferring my child’s car title out of my ex’s name/into my name will affect his Chapter 7 filing ..
My ex husband & I (divorced since 2016) agreed to buy our 16 year old daughter a vehicle last year. I was unable to qualify for the loan due to my credit so we used his credit, therefore the loan/title went in his name but I have personally made ALL payments including the down payment. The loan is now paid off/ the title is fully in his name. He recently mentioned he may need to file for Ch7 bankruptcy. I am now afraid my daughters car will be sold as an asset. I have advised my ex that I need my daughters car title transferred into my name since I 100% paid it off & I want to protect it. He’s afraid this will look like he’s transferring assets out of his name fraudulentlyto avoid it being taken by the trustee. I just think it would be completely wrong to have a car taken in HIS bankruptcy case, that I fully paid for to benefit my child. Please advise if we should wait to do the title transfer, or do it ASAP & explain to the trustee. He plans to file in the next 6 months. Thank you
A: You didn't mention the value of the car, but for the purposes of this answer I'm going to assume that it exceeds the exemption amount.
Transferring the title into your name doesn't resolve the issue, it simply changes the nature of the problem. If your husband files bankruptcy with the vehicle titled in his name, his lawyer will probably assert that he only has "bare legal title". This means that while his name is on the title to the vehicle, he's not the equitable owner of the vehicle because he didn't pay for it. This is a commonly used tool, but I can't say whether it will work in Florida.
If your husband transfers the title into your name, he'll have to disclose that in his bankruptcy petition. The trustee will then try to determine whether the transfer can be avoided (reversed). Your husband could assert that there was no fraudulent conveyance because he had no equitable interest in the car to begin with and as such didn't transfer anything of value.
Provided that a bare legal title argument is valid in Florida, it's probably less risky to have your husband keep the car in his name than it is to open himself up to an avoidance action based on federal and state law. Presumably, his attorney has spoken to him about these options. I would retain a local bankruptcy attorney to explain to you exactly how the courts and trustees respond to the bare legal title argument in the jurisdiction in which your husband expects to file.
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