Can I quit claim deed to an entity that intends to file bankruptcy? 7 Answers as of February 14, 2011

I am in the process of potentially short selling or foreclosing on my home which is under water by $100K. A friend of mine whom is an investment banker approached me regarding an option in which I will quit claim the deed to his entity, he will then bankrupt the entity, restructure the note with the bankruptcy judge taking advantage of the current value and an interest rate of 2% above prime, and finally lease the home back to me for however long I wish. The investor and I will then split the equity in the home as the home begin to go up in value. He explained this to me in such a way that I believe I understand but I thought I would ask a bankruptcy professional if this seem to be a legal way to get me into payments that I can afford without having to move out of my home.

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William C. Gosnell, Attorney at Law
William C. Gosnell, Attorney at Law | William C. Gosnell
Yes, you can.
Answer Applies to: Tennessee
Replied: 2/13/2011
Janet A. Lawson Bankruptcy Attorney
Janet A. Lawson Bankruptcy Attorney | Janet Lawson
This sounds fishy to me. First of all, he can't restructure note anymore than you can. Second, this is sounds like a common scam that has been around for years. What they do is collect payments from you until the house is foreclosed. He pockets your money and walks away. Don't fall for this.
Answer Applies to: California
Replied: 2/9/2011
Gus Johnson Attorney at Law
Gus Johnson Attorney at Law | Gus Johnson
I don't believe that will work.
Answer Applies to: South Dakota
Replied: 2/9/2011
Carballo Law Offices
Carballo Law Offices | Tony E. Carballo
Your "friend" wants you to be a party in a bankruptcy fraud scheme that will not only fail but might get you room and board free in a federal prison for some years. Don't even think about it. All that about modifying the mortgage in bankrutpcy as your friend described it is nonsense and it is intended to reel you in like a fish. I am sure you will be asked to pay something sooner or later or someone will be defrauded as a result of your participation in the scheme (probably you, the bank and the court). Your friend is either a con man or he is very naive and the victim of a con man. At least you had the common sense to ask a professional. When things are too easy or too good to believe that means it is neither easy nor good. By the way, no legitimate investment banker would propose what your friend is proposing. Is your friend related to Bernard Madoff?

The only way to change the payments on your first mortgage is through a loan modification if you qualify. Judges in bankruptcy cannot change the terms of the first mortgage on your residence and the idea your friend is proposing is to fraudulently convert your residence to an investment property and then "cram down" the mortgage balance and modify the terms of the loan in a Chapter 11 to be filed by some artificially-created entity such as a trust, LLC or Corporation. One big problem is that the debtor is and will continue to be you and not the entity to which you will quit claiming the property. Your mortgage cannot be transferred or assigned without permission from the creditor (bank). Furthermore, once you transfer the property, assuming any of that is true, how are you going to get it back or be able to "split" that future equity. Again, keep away from that scheme.
Answer Applies to: California
Replied: 2/8/2011
Greifendorff Law Offices, PC
Greifendorff Law Offices, PC | Christine Wilton
Bad idea. Bankruptcy filings must be in good faith and this is not.
Answer Applies to: California
Replied: 2/8/2011
    Law Office of Larry Webb
    Law Office of Larry Webb | Larry Webb
    You should consult with a criminal attorney who has experience with federal bankruptcy fraud.
    Answer Applies to: California
    Replied: 2/8/2011
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