Kessler v. Travelers Property Casualty Co. of America (In re Kessler)
- Summarized by David Treacy , U.S. Bankruptcy Court, Eastern District of Kentucky
- 2 days 12 hours ago
- Case Type:
- Consumer
- Case Status:
- Affirmed
- Citation:
- 25-2139 (9th Circuit, Feb 23,2026) Not Published
- Tag(s):
-
- Ruling:
- The U.S. Court of Appeals for the Ninth Circuit upheld a bankruptcy court's order reducing a debtor's homestead exemption to $0 under 11 U.S.C. § 522(o). The bankruptcy court did not clearly err in finding the debtor used nonexempt funds to purchase real property with the intent to hinder, delay, or defraud creditors. In its ruling, the bankruptcy court properly assessed badges of fraud and considered the totality of the evidence, including the debtor's explanations for her actions, and found the debtor's account of events not to be credible.
- Procedural context:
- In affirming the district court's decision upholding the bankruptcy court's ruling, the Ninth Circuit emphasized that fraudulent intent is a factual finding reviewed for clear error. It explained that while the bankruptcy court considered badges of fraud, "it did not treat them as a 'dry checklist' ... or presumptive proof of fraudulent intent." The circuit court noted the bankruptcy court's credibility determinations and explained that, where alternative inferences can be drawn from the record, "the factfinder's choice between them cannot be clearly erroneous."
- Facts:
- Debtor/Appellant Drita Pasha Kessler filed a bankruptcy petition in the U.S. Bankruptcy Court for the Central District of California. Creditor/Appellee Travelers Property Casualty Company of America objected to Debtor's claimed homestead exemption, alleging Debtor used nonexempt funds to acquire the homestead in an effort to hinder, delay, or defraud creditors. The bankruptcy court received substantial briefing and testimony via declarations. Based on the record, the court concluded Debtor placed significant assets (including real property and large sums of money) in the names of others (including her sister, daughters, and a bank account in her priest's name). The court found Debtor offered inconsistent testimony, including about how she acquired an interest in the real property designated as her homestead. The court found the evidence established five statutory badges of fraud under California law and that Debtor's explanations lacked credibility, and concluded Debtor engaged in a pattern indicative of fraudulent concealment. The court thus upheld the objection to Debtor's homestead exemption. Debtor took an appeal to the U.S. District Court for the Central District of California, which affirmed. Debtor took a subsequent appeal to the Ninth Circuit.
- Judge(s):
- GRABER, CLIFTON, and JOHNSTONE
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