Don't Create A Fraudulent Transfer Situation With Your Bankruptcy

If you have considered a chapter 7 bankruptcy filing, you might be blissfully unaware of how your actions prior to the filing could come under scrutiny. When you file your federal paperwork, the bankruptcy trustee (who administers your case) has the power to take total control of your financial situation. The trustee will become involved in what you own, what you owe, and even events that transpired before you filed bankruptcy. That's why it's important to know about the potential for being accused of making fraudulent transfers before you file your paperwork. Read on to learn more.

Why the Trustee Is so Interested in Your Property

You may not have heard bankruptcy described this way, but a chapter 7 bankruptcy is also sometimes referred to as a liquidation bankruptcy. That term is meant to set it apart from the other common consumer form of bankruptcy, chapter 13, where no property is ever lost. While knowing this about a chapter 7 filing can make some just naturally nervous, no property is taken in most cases. Exemptions, the property's value, and the dollar amount of your bankruptcy all affect the potential to lose the property. In some cases, however, the bankruptcy trustee has the power to seize some of your property and sell it to help satisfy some of your creditors. Even though the chances for the loss of property is low, the trustee still takes a keen interest in your property.

Property Transfers in the Last Two Years 

Part of your bankruptcy paperwork requirement is to list information about what you own. You must list what you currently own and any property that has been given away, sold, or traded in the two-year period leading up to the bankruptcy filing. Property means vehicles, boats, jewelry, homes, and anything else that might be of some value. As a gentle reminder, failure to be honest when completing bankruptcy forms constitute bankruptcy fraud, a federal offense.

Take Backs and Fraud

If the bankruptcy trustee suspects any of the below, your case might be held up, and you can even be charged with fraud. The trustee also has the power to take back and sell any property they deem necessary.

Here are few red flags for the trustee:

  • Giving away valuable property, such as a boat, to a friend or relative.
  • Selling an asset for far less than true market value.
  • Participating in a paper-only transaction. This is where you create a fake bill of sale or sales receipt, and the other person pretends to take ownership of the property.

Be sure to discuss any sales or gift transfers that occurred within the last two years with a bankruptcy attorney like Charles J Schneider PC.