Save House Equity From Seizure

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Busby & Associates Save House Equity From Seizure by a Chapter 7 trustee in bankruptcy

The changes to the bankruptcy code in 2005 contains potential traps for Debtors trying to protect assets like their house. Putting a large payment down on a house or paying a large amount to reduce the mortgage principal could put the Debtors in position to lose that money.

 Changes to the bankruptcy code allow a Chapter 7 Trustee to reduce the protected equity in a homestead or even remove the exemption protection in full. The Trustee has to prove that the money put into the house was done with the intent to delay, hinder or defraud creditors.
The Bankruptcy Code now allows a Chapter 7 bankruptcy Trustee to review financial transactions like a down payment or principal reduction in a homestead over the past ten years. Texas has one of the most generous homestead exemptions in the United States, but even that exemption can be severely limited or even reduced completely if the Trustee’s allegations are proven true.

Can Bankruptcy Save House Equity From Seizure ?

In our client’s case, they moved to Texas over two years before filing for
bankruptcy. They made a large down payment on their homestead from funds in their bank account. When they filed bankruptcy, they exempted all of the equity in the house using Texas laws. However, their Chapter 7 Trustee sought to reduce the exemption in their house and use that reduction to pay back their other creditors. The Trustee argued that putting the money into the down payment was done with an intent to defraud their creditors. The reasoning was that by putting the funds into the house, it took them out of reach of their other creditors. Had the Debtors not put the funds into the house, the money would have been available for distribution to their other creditors. The argument was sound, but it relied upon the specific facts of our Debtor’s case.

Yes, Bankruptcy CAN Save House Equity From Seizure

We argued that the Debtors had legitimate reasons for how and why they used the money. The Trustee naturally argued that the reasons were not legitimate. The matter was briefed and went to trial on this issue. Ultimately, the Court ruled in favor of our clients. They got to keep their house and the equity in it safe from their creditors. We spent a lot of time and resources on this trial and we are very happy that the Court decided in favor of our clients.

Busby & Associates will fight to Save House Equity From Seizure

Unfortunately, not every bankruptcy attorney will fight to protect his clients from losing assets to a bankruptcy trustee. It takes a lot of work. It takes a lot of time. There are times to settle. This was not one of them. We are glad we could help our clients protect the equity in their house.
Be aware that any large financial transactions done before you file for bankruptcy protection are potential problems. People can and do lose their houses in bankruptcy. This is why it is so important to consult with an experience bankruptcy firm like ours before you file. It is very important that you fully disclose to your attorney all of your past financial transactions
The law firm of Busby & Associates has helped bring peace of mind to thousands of clients and we’ve proven we can fight for our clients and save house equity from seizure. If you need help with protecting your house and its equity, please give us a call.

Please visit our website for more information about us and bankruptcy. Call us today at (713) 974-1151 to schedule a no-obligation consultation or feel free to email us at