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Court rules debt can still be discharged after asset transfer

Ohio residents who have more debt than they can afford to pay back may choose to file for bankruptcy. While considering bankruptcy, it is important for them to understand the laws about transferring assets. If valuable property is transferred before a bankruptcy filing, the action could result in a denial of a discharge.

Earlier in 2016, the U.S. Court of Appeals for the 9th Circuit affirmed a lower court's decision to allow a bankruptcy discharge despite an asset transfer. The debtor was a dentist who transferred a condominium that he owned to a trust fund after he filed for Chapter 13 bankruptcy. Though his first and second attempts to file for Chapter 13 bankruptcy were dismissed, he was subsequently approved for Chapter 7 bankruptcy.

One of the dentist's creditors was a former patient who had previously obtained a judgment award for medical malpractice. The former patient filed a petition to bar the dentist's discharge of the debt. According to the former patient, the dentist transferred his condominium with the intention of preventing creditors from obtaining repayment. However, the court later ruled in favor of the dentist since the transfer occurred more than one year before he filed for Chapter 7 bankruptcy.

As this case shows, Chapter 7 bankruptcy has several procedural requirements that must be followed for a case to proceed successfully to discharge. There are a variety of eligibility rules and regulations as well, which an attorney who has experience with these matters can outline to a client who is seeking debt relief.

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