A recent case from the U.S. Bankruptcy Court for the District of Colorado offers an important lesson for anyone considering bankruptcy while trying to protect assets. In In re Curt Michael Ranta, the court addressed whether a debtor could claim a homestead exemption after transferring property ownership to a spouse just before filing bankruptcy. The case illustrates how courts look beyond paperwork to examine intent—and why efforts to shield assets can fail.
A few important things to remember here. This is an unpublished opinion and it is not binding, especially the further out from the Colorado Bankruptcy Courts one gets. Also, as of the date of this post it is currently on appeal. Finally, and most importantly, this article only covers the pre-bankruptcy planning as it relates to a homestead exemption and the application of §522 (o). There are still other mechanisms available for pre-bankruptcy planning.
The Facts: Transferring Ownership Before Bankruptcy
Ranta was a real estate developer who had personally guaranteed millions of dollars in loans for a California property development. After the project failed and foreclosure wiped out the collateral, his lenders obtained personal judgments against him for more than $4 million.
In the years leading up to his bankruptcy filing, Ranta implemented what he described as an “estate planning strategy”: he transferred 99% ownership of various real estate assets to his spouse while retaining only 1% himself. This included a family home in Colorado, purchased with a mortgage solely in his name, yet titled 99% to his spouse and only 1% to him.
When he filed bankruptcy, Ranta claimed a California homestead exemption (because of where he had lived during the statutory lookback period) on the Colorado property. His creditors objected, arguing he wasn’t entitled to the exemption—and that even if he was, it should be reduced to zero because he transferred non-exempt assets into the home with the intent to avoid creditors.
The Legal Issue: Exemption Objection Under § 522(o)
Federal bankruptcy law allows debtors to protect certain property from creditors by claiming exemptions. But there’s an important caveat: under 11 U.S.C. § 522(o), if a debtor uses non-exempt funds to increase the value of a property they’re trying to exempt, with intent to hinder or defraud creditors, the exemption can be reduced.
In simple terms: you can’t move money or assets into exempt property (like a home) in a way designed to put them out of reach of creditors—at least not without risking losing the exemption.
The creditors argued that Ranta used his own funds to buy the house but titled it mostly in his spouse’s name to shield it from them. They pointed out several “badges of fraud” the court considers when deciding if a debtor acted with improper intent, such as:
- Transferring the property to an insider (his spouse)
- Retaining control and living in the property
- Concealing the source of funds by routing money through his spouse’s accounts
- Making these transfers after he knew he would owe creditors millions
- Being insolvent at the time of transfer
The Court’s Ruling: Exemption Reduced to Zero
The court found that although Ranta was technically eligible to claim California’s homestead exemption on the Colorado property, his conduct triggered § 522(o). The judge concluded that Ranta intentionally structured the purchase and ownership of the property to hinder, delay, or defraud his creditors. Just because something is called an “estate planning strategy” doesn’t mean that it is in reality an estate planning strategy.
Because the down payment and equity were funded with non-exempt assets he tried to shelter, the court reduced his homestead exemption to zero. In effect, his attempt to protect the home backfired: the home’s equity could now be used to satisfy creditors.
What This Means for Clients
If someone is facing financial difficulties, it’s natural to want to protect a home and other key assets. Most people don’t intentionally defraud their creditors and only want enough to ensure that they have a place to live and a way to get to work. Frankly speaking, the exemptions afforded to most people offer enough protection. Also, transferring assets prior to a bankruptcy, if done incorrectly, can make a situation even worse. If there is debt outstanding, people and their business’ should NEVER transfer assets without speaking with an attorney first. Additionally, the attorney they speak with should either be a bankruptcy attorney or consult with a bankruptcy attorney.
But this case shows that even with careful planning pre-bankruptcy asset transfers are not without risk. Timing and intent matter enormously in bankruptcy. Courts look closely at whether recent transfers or changes in ownership were designed to avoid paying creditors. Even if the paperwork seems valid, the underlying purpose can undermine those protections.
Some key takeaways:
✅ Transferring property to family members shortly before bankruptcy can raise red flags
✅ Using your own funds to buy property titled to someone else may still count as your property in the eyes of the court
✅ Courts can undo or “look through” transactions designed to hide assets from creditors
Avoiding Pitfalls: The Importance of Legal Advice
Bankruptcy law provides powerful tools to protect honest debtors—but it also punishes efforts to game the system. If you’re considering bankruptcy or asset transfers in anticipation of financial trouble, it’s critical to work with experienced counsel who can help navigate these rules legally and ethically.
At Cohen & Cohen we have extensive experience in pre-bankruptcy planning, both engaging in and unwinding. We guide clients through complex bankruptcy and creditors’ rights issues with clarity, strategy, and integrity. If you have questions about protecting your assets or planning for bankruptcy, contact us today for a consultation.
