Bankr. No.:
98-40040
Chapter:
7
Date of Decision:
July 30, 1998
Issue:
Whether the debtor could declare exempt life insurance that he purchased pre-petition from proceeds from the sale of his lien-free car to his mother?
Ruling:
The exemption in the life insurance policy was denied. The Court found that the debtor had made a sham sale of his unencumbered car to his mother in order to temporarily shelter his equity in the car in an exempt life insurance policy. The debtor's fraudulent intent regarding the car sale and purchase of the insurance policy was evidenced by his lack of present intent to retain the policy, the transfer of his car was made in anticipation of bankruptcy, the transfer was to a family member, and the debtor retained use of the car. The Court did not find that the sale price for the car was unreasonable (not all the proceeds were used to purchase the policy). Therefore, only the value of the life insurance policy remained in the estate and could not be exempted.
Full Bankruptcy Court Decision:
