Transferring Property Before Filing for Bankruptcy

Transfer Property

When you think you might file for bankruptcy, it’s probably best to avoid making property transfers without legal guidance. Some people think that they can retitle their home to someone else or give property away to protect it from bankruptcy, but these attempts can present serious legal problems.

Not only do bankruptcy trustees have the power to reclaim inappropriately transferred property, but criminal allegations of bankruptcy fraud can follow under the “right” circumstances.

Bankruptcy’s Clawback Provision

In bankruptcy law, the Clawback Provision refers to a bankruptcy trustee’s ability to void a transfer and retake property from a recipient. This is most often done in cases involving fraud, but it can also happen when the court determines a preferential transfer took place.

Fraudulent Transfers Before Bankruptcy

In a nutshell, the court is likely to deem a transfer as fraudulent when there’s enough evidence that it was done to hide assets from the bankruptcy process or harm a creditor’s interest in recovering debt.

In most cases, a fraudulent transfer meets at least one of the following criteria:

  • The transfer occurred within two years before the bankruptcy filing date or the period permitted by state law, whichever is greater
  • The transfer occurred with the intent to defraud, delay, or otherwise hinder a creditor
  • The transfer did not equate to the fair market value of the property in question
  • The transfer caused the bankruptcy filer to become insolvent
  • The transfer was intended to cause the bankruptcy filer to become insolvent

When any property transfer meets one or more of these conditions, there’s a serious risk that the bankruptcy trustee will take action. This can result in the bankruptcy filer’s responsibility for debt incurred by the alleged fraud and felony criminal charges.

What Is a Preferential Transfer?

A preferential transfer before bankruptcy refers to a transfer of property to a preferred creditor. A preferred creditor is often a family member or business partner – essentially, someone who may be a legitimate creditor but can also benefit the bankruptcy filer.

If a preferential transfer is made within 90 days of filing for bankruptcy, the trustee can void it and retake the property in question.

Can I Transfer Property Before Filing for Bankruptcy?

You can transfer property before filing for bankruptcy as long as the transfer doesn’t amount to fraud or is preferential in its nature. You may need professional legal guidance to help you make these distinctions and take the right steps toward protecting your chance of achieving the debt discharge or reorganization you need.

To get the legal help you need, reach out to Buchalter & Pelphrey Attorneys At Law today. Our bankruptcy lawyers can help you with Chapter 7, Chapter 13, and other debt-related matters. We can also provide the answers and services you need for your specific legal situation.

For more information and to request a free case review, contact Buchalter & Pelphrey Attorneys At Law today.

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