Filing Bankruptcy in Michigan??
I have questions about Bankruptcy in Michigan. What can you keep?
Transfering of property before Bankruptcy. Time limits, and so on.
While the general federal rule is one-year (on avoidability of transfers),
Michigan has a full body of state law that imposes no time limits on transfers
of property which were made to avoid creditors. That means that a bankruptcy
trustee can sue transferees to recover property (assuming, of course, that
the trustee finds out about it). A general rule is that economic activity affec
ting a debtor for a two-year period must be disclosed to the trustee.
You should consult a Michigan lawyer who can explain the detailed lists of
exemptions available to debtors, and to what extent non-exempt property can
be converted to exempt property.
(Note, as to the first point, see, for example, Dunn v. Minnema (a 1952 case,
I think) allowing a trustee to go back 20 years to avoid an allegedly fraudul-
ent transfer).
I am writing an article on choice of law in fraudulent transfers.
There is little consistency or pattern in choice of law; but then it
is relatively rare that the statute of limitations is a factor (in the
Universal Clearing House case, as I recall, for example the result
would have been the same whether Maryland or DC law had been applied).
By changing domicile it may (or may not) be possible to escape an
unattractive state statute of limitations (or absence thereof).
(Anyway, think of Bowie Kuhn, who absconded from New Jersey to Florida
after the NY law firm he was a partner is was hit with a multi-million
dollar judgment for malpractice. Accordint to CBS "60 Minutes" which
is, after all, the fount of all knowledge, he claimed homestead and
other state exemptions to escape payment; I recall reading elsewhere
that he settled a $100 million demand for $1 million.) (Under the
Insolvency Act 1987 absconding within six months of bankruptcy is an
"offence" here in the UK; and just this week the Times published a
case report of the court enjoining a Hong Kong businessman from
leaving the UK prior to examination in bankruptcy; but that's another
matter.)
Of course if English (or, perhaps Michigan) law is applied, the
absence of a statute of limitation could be critical, but it is often
avoided by the use of asset protection trusts, or homestead rights (in
Florida or Texas, say). The longer the period of time that passes, the
harder it is to recover the funds, purely as a practical matter. That
is true even here in England: the elements of proof needed become that
much more difficult to present, whatever the caselaw says. (In the
USA, unlike here in Britain, a plaintiff will typically file a lis
pendens to assert his claims against property. The equivalent here --
a draconian "Mareva" injunction tying up all the defendant's property
-- requires some substantial showing of probable success or prima
facie fraud.
When I post this comment I will check the case Mr Golden has cited,
and also current Michigan law, on Lexis and perhaps I wil have further
comment.
Note that the bankruptcy trustee steps in the shoes of the creditors;
thus as well as having a federal bankruptcy law right of avoiding
fraudulent transfers for the year prior to filing he/she can use
whatever state (or foreign) law seems attractive.