Posted on Oct 29, 2012

Toni Braxton, who filed chapter 7 bankruptcy in California in 2010, is in hot water in her ongoing case. Her trustee is claiming that she fraudulently transferred $53,490 to her estranged husband in order to avoid paying back creditors. Now, the trustee is suing Lewis to get the money back.

As reported by TMZ, Ms. Braxton, through her representative, has denied the accusation.

"All of the payments made to Lewis prior to Toni's bankruptcy filing were appropriate transfers for reasonable and necessary personal and business expenses in the ordinary course of her business."

Ms. Braxton, in her petition, claimed she was worth somewhere between $1 mil and $10 million, but she could have up to $50 million in debts. This is, in fact, the second time Braxton has filed for bankruptcy, this time due to several years' worth of health-related issues that prevented her from working.

In this bankruptcy, as in any other, the law requires creditors to be treated equally, with no one of them being given preferential treatment over the other. Here, the trustee suspects that Ms. Braxton was favoring her husband through this transfer, and as such, is demanding the money back.

One exception to a "preference claim" is where money is paid "in the ordinary course of business," or in return for additional goods or services. That is what she is now claiming in an attempt to protect the transfer.

There is often a temptation, when money is owed to friends and family, to pay them back and then seek to discharge the rest of the debt. Unfortunately, the bankruptcy code frowns on this and empowers the trustees to go after that family member to get the money back. That is something Ms. Braxton is finding out now.

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