In Re Fancy, a businessman knew that he was facing substantial losses from pending litigation. Shortly before declaring bankruptcy, he transferred his interest in the matrimonial home to his wife. What was the result?
A) The Court allowed the transfer, because transfers between spouses are exempt under the Bankruptcy and Insolvency Act.
B) The Court reversed the transfer, because it was unnecessary: The wife would automatically receive the matrimonial home once the bankruptcy took effect.
C) The Court declined to exercise jurisdiction, because a bankrupt has no status to appear in court.
D) The Court reversed the transfer, determining it was a prohibited settlement under the Bankruptcy and Insolvency Act.
E) The Court allowed the transfer, determining the wife was not a co-conspirator.

Question

Quizplus · Accepted Answer

The transfer of the matrimonial home to the bankrupt's wife shortly before declaring bankruptcy is considered a prohibited settlement under the Bankruptcy and Insolvency Act. The Court will likely reverse the transfer to recover the asset for the benefit of the bankrupt's creditors. Transfers made within one year of bankruptcy with the intent to defeat or delay the interests of creditors are generally vulnerable to challenge.

In Re Fancy, a Businessman Knew That He Was Facing