Waldron v. Huber (In re Huber) - 493 B.R. 798 (Bankr. W.D. Wash. 2013)

Rule:

Among the more common circumstantial indicia of fraudulent intent at the time of a transfer by a bankruptcy debtor are: (1) actual or threatened litigation against the debtor; (2) a purported transfer of all or substantially all of the debtor's property; (3) insolvency or other unmanageable indebtedness on the part of the debtor; (4) a special relationship between the debtor and the transferee; and, after the transfer, (5) retention by the debtor of the property involved in the putative transfer.

Facts:

Plaintiff bankruptcy trustee brought an adversary proceeding against defendant bankruptcy debtor seeking a determination that transfers of the debtor's assets into a trust settled by the debtor were avoidable as fraudulent transfers under 11 U.S.C.S. § 548(e)(1) and state law. The debtor contended that the self-settled asset protection trust was valid under the law of Alaska where the trust was created, and that the debtor lacked the specific intent to defraud creditors. The trustee moved for summary judgment.

Issue:

Did the debtor transfer his assets in fraud of the bankruptcy trustee, thereby warranting the grant of summary judgment in favor of the trustee? 

Answer:

Yes.

Conclusion:

The bankruptcy court first held that the designation of Alaska law in the trust was not controlling, and the trust was invalid under the law of Washington where the debtor was domiciled, trust assets were transferred, and creditors and trust beneficiaries were located, and which thus had the most substantial relation to the trust. Further, rather than estate planning, the debtor’s fraudulent intent was established by numerous badges of fraud, including threatened litigation against the debtor, the transfer of substantially all of the debtor’s assets, the debtor’s substantial indebtedness, and the grants of substantially all of the debtor’s requests for distributions from the trust. Further, the debtor received no consideration for the transfers, the evidence was overwhelming that the debtor was desperate to shield assets from creditors, and the debtor’s mere denial of fraudulent intent was not by itself sufficient to overcome the evidence of fraudulent intent. Accordingly, the trustee's motion for summary judgment concerning fraudulent transfers was granted.