Question: Ethics Case Peter and Geraldine Tabala (Debtors), husband and wife, purchased a house in Clarkstown, New York. They purchased a Carvel ice cream business for $70,000 with a loan obtained from People's National Bank. In addition, the Carvel Corporation extended trade credit to Debtors. Two years after getting the bank loan, Debtors conveyed their residence to their three daughters, ages 9, 19, and 20, for no consideration. Debtors continued to reside in the house and to pay maintenance expenses and real estate taxes due on the property. On the date of transfer, Debtors owed obligations in excess of $100,000. Five months after conveying their residence to their daughters, Debtors filed a petition for Chapter 7 bankruptcy. The bankruptcy trustee moved to set aside Debtors' conveyance of their home to their daughters as a fraudulent transfer. In re Tabala, 11 B.R. 405,1981 Bankr. Lexis 3663 (United States Bankruptcy Court for the Southern District of New York)
1. What is a fraudulent transfer?
2. Is the home that the debtors transferred to their children an asset of the bankruptcy estate?
3. Did the debtors act ethically in this case?