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In re Reed

United States Bankruptcy Court for the Northern District of Texas
12 B.R. 41 (1981)


Facts

Hugh Reed and his wife (defendants) filed for chapter 7 bankruptcy. During the month immediately prior to filing for bankruptcy, Reed engaged in prebankruptcy planning. Reed sold many items at a significantly lower price than what he had paid for them. Reed sold guns, antiques, and stock in Triple BS Corporation for approximately 20 percent of their value. Reed also sold some gold coins at market value. Reed sold most of these items to Steve Gallagher 10 days before Reed filed for bankruptcy. The proceeds of these transactions, approximately $35,000, were applied to liens on Reed’s homestead, which were exempt under state-exemption statutes. The bankruptcy trustee (plaintiff) filed a complaint, challenging Reed’s entitlement to these exemptions. The trustee claimed that the exemptions should be avoided for flagrant pre-bankruptcy planning and fraudulent intent. The trustee argued that fraudulent intent was shown, because the Reeds received less than a reasonably equivalent value for nonexempt assets.

Rule of Law

Issue

Holding and Reasoning (Brister, J.)

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