What about property transferred prior to filing bankruptcy?

What about property transferred prior to filing bankruptcy? This is a sticky subject.

Many people ask about property transferred prior to filing bankruptcy. What you must understand is that trustee’s job is to collect assets of your estate to pay back creditors. If you have transferred assets that the Trustee would have otherwise been able to liquidate to pay back creditors, you may have committed fraud on the court.  The Trustee has the power to take back these assets from the people that you gave them to (in addition to using other scary powers that you would rather not know about).

Whether you did something wrong in the eyes of the court depends largely on when you gave the gift and when you knew you were going to file. So, what about property transferred prior to filing bankruptcy?

There are two areas of inquiry:

1. Was the transfer a gift, and if so–was it exempt or non-exempt property at the time of transfer?

The issue with giving away your things prior to filing bankruptcy revolves around whether your things would have been exempt or non-exempt at the time of filing.  It’s really very straightforward analysis, and timing is everything.  If you give away your non-exempt property prior to filing bankruptcy, you can be sure that the trustee will go looking for those assets.

If the property would have been exempt at the time of filing, we’ll talk about whether you can get it back prior to filing

OR…

2. What the transfer an exchange, and if so–was the transfer either actually fraudulent, or constructively fraudulent?

An actually fraudulent conveyance occurs when a debtor transfers property prior to filing with the intent to hinder, delay, or defraud a creditor.  If a court finds that a debtor had the intent to deprive a creditor, then the court may find that the debtor is not entitled to a discharge.  Intent is tough to prove, and you and I will discuss the specifics of your situation when we meet.

A constructively fraudulent conveyance occurs when a debtor receives less than the reasonably equivalent value, and was either insolvent at the time of transfer, or became insolvent as a result of the transfer.  Here, the court won’t necessarily find that the debtor is not entitled to a discharge, but the court will likely find that the transfer must be set-aside.  Yes, this means that if you sold your grandmother’s priceless antiques for $50 because you needed to pay the water bill, the court may go looking for the antiques.

I will not represent you if I suspect you intend to defraud the court, and I will not help you or advise you about timing your giving. I will ask you specific questions about gifts you have made during our interview and decide for myself if I can represent you.