The United States Seventh Circuit Court of Appeals recently released a decision in a bankruptcy appeal that affirmed a lower court’s ruling that voided a debtor’s pre-filing transfer of a farm to her father, allowing the trustee to take partial possession of the property. The debtor’s claim that the property was given to her father in exchange for his cessation of unrelated legal proceedings against her was rejected by the appellate court as unjustified and not reasonably related to the value of the asset that was transferred before the debtor filed for bankruptcy.
The appellant in the case of Griswold v. Zeddun was a Chapter 7 bankruptcy debtor who appealed the bankruptcy court’s decision to avoid the transfer of a farm to her father before she filed for bankruptcy. The lower courts agreed that the transfer of the property was a “fraudulent transfer” under the meaning of the bankruptcy code, since the debtor was not adequately compensated for the property, giving the appearance that the transfer was made to allow the debtor and her father to avoid the jurisdiction of the bankruptcy court. The debtor had claimed that the transfer was legitimate because her father assumed the debt on the property, and he agreed to stop pursuing an unrelated legal claim against her as compensation for the remaining equity in the property.