Can Creditors Reverse Your Land Trust?

Lets say John Doe gives up his house to me subject-to. I have him establish a trust and put the house into the trust, then have him assign the beneficial interest of the trust over to me. There is also no equity in the house. Now lets say at the same time John quits on his other obligations such as credit cards etc. If these creditors get a judgement on him, can they come and reverse our transaction months later or put a lien on the house?



Comments(4)

  • NewKidInTown317th September, 2009

    As a general rule, I am going to say no. If the property was sold subject to, the title has been transferred and a new judgment against the former owner will not attach to the property.

    There are exceptions to the rule.

    One exception is if John Doe intentionally created the trust to hide his assets from creditors. Then his transfer of the property to the trust could be declared a fraudulent transfer and unwound by a court.

    Bankruptcy courts have been known to set aside recent sales/transfers of property when equity in the property could have been used to satisfy creditors.

  • energy18th September, 2009

    In what case would it look like he had done this to run from his creditors. Is it how long the transaction was done before he defaulted on his debt? If so what do you think is the a safe timeline 1 year, 1.5 years?

  • loon18th September, 2009

    Any creditor with enough aggression and deep enough pockets can hire lawyers and file to reverse a property transfer. Will they? Not for a few grand. It sounds like you might be considering a deal with a shady character with big debts. Remember the old adage, lie down with dogs, gonna get fleas.

  • ITBInvestor29th September, 2009

    NATIKABETHEL, check with your mortgage broker about your circumstances. When you get back on your feet, a good broker can find some programs for this price point if you maintain good credit.

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