Can I Transfer Any Assets Before I File for Chapter 7 Bankruptcy?
Anyone who is currently considering a personal Chapter 7 bankruptcy filing should have a clear understanding of how US bankruptcy law treats the transfer of funds or assets in the two-year period prior to a bankruptcy filing. In short, you may be able to transfer assets for necessary reasons or to obtain the value of what the asset is worth (i.e., by selling it at fair market value), but you cannot make certain other transfers as gifts or for amounts less than what the asset is worth. Our South Florida bankruptcy lawyers can explain all of this below in more detail, and we can answer any questions you have about your situation today.
You Can Sell Assets for a Fair Amount Prior to a Bankruptcy Filing
Do you need to sell an asset to pay necessary bills such as your mortgage or your utilities, or to buy necessities for your household such as groceries? If so, you are allowed to sell your assets and then transfer ownership of them in the two-year period prior to filing for bankruptcy without a problem. In order to make such a transfer of assets lawfully, you must be sure to do the following:
- Sell the asset at fair market value (i.e., sell the asset for an amount that it is worth);
- Maintain records of the sale and how you used the proceeds; and
- Disclose the transfer of the asset when you file for Chapter 7 bankruptcy.
You Cannot Gift Assets or Sell for a Nominal Amount Prior to Your Bankruptcy Filing
What you cannot do in the two-year period before you file for Chapter 7 bankruptcy is transfer an asset without receiving a fair value for it in exchange. This means you cannot gift an asset to a friend, family member, or other party, and you cannot “sell” the asset for a nominal amount (less than what it is worth) that amounts to a gift, in effect.
If this happens, it can look like a fraudulent transfer, and multiple consequences may result from such a transfer. First, the trustee can object to the transfer as a fraudulent transfer, alleging that you transferred the asset with the intention to conceal or hide it so that it would not be liquidated in your Chapter 7 case. The trustee can also attempt to recover the transfer and reverse it.
If you have already made such a transfer and it did not realize the possible consequences, you may be able to wait to file for bankruptcy. However, you should discuss such a plan with a bankruptcy lawyer to ensure that there are no issues of potential fraud that may arise, even if the transfer occurred more than two years prior to your bankruptcy filing.
Contact Our West Palm Beach Bankruptcy Lawyers to Learn More About Individual Chapter 7 Cases and Your Ability to Transfer Assets Lawfully
Are you considering an individual Chapter 7 filing, or filing jointly for Chapter 7 bankruptcy with your spouse? If so, it is essential to understand how US bankruptcy law limits your (and your spouse’s) ability to transfer assets in the immediate period prior to a bankruptcy filing. As we discussed above, transferring assets prior to a Chapter 7 bankruptcy filing can have serious consequences. As such, you should always discuss this issue with a lawyer before you actually give or transfer any assets or money to a friend or family member, or even to a creditor before filing for Chapter 7 bankruptcy. One of the experienced West Palm Beach bankruptcy attorneys at Kelley Kaplan Delaney & Eller, PLLC, PLLC can provide you with more information and can answer any questions you have. Contact us today for more information.
Source:
law.cornell.edu/uscode/text/11
