Avoiding Property Transfers Prior to a Bankruptcy Filing

Individuals who are planning to file for bankruptcy, including liquidation or reorganization bankruptcy, need to think carefully about any asset transfers they are considering prior to the filing. There are many reasons that people transfer assets, from sending money to adult children or other relatives to making gifts. Yet transferring assets in the time period leading up to your bankruptcy filing can have unintended, and potentially disastrous, consequences. If you make an asset transfer (or multiple transfers) prior to filing for bankruptcy, it may look as though you are attempting to conceal assets, and the bankruptcy court could have concerns about the possibility of bankruptcy fraud. You can avoid such issues by working with an attorney from the beginning of your bankruptcy case — before you even file — and honestly disclosing all relevant information.

Consider the following information about property or asset transfers and individual bankruptcy filings.

Disclosing Asset Transfers from the Previous Years 

When you file for personal bankruptcy in Florida, you will need to complete a range of forms, including materials in which you disclose all transfers of any assets or property at least in the two years leading up to your bankruptcy filing (under the US Bankruptcy Code), and in some cases, the trustee may “look back” further. Many of these transfers were possibly, or even likely, made prior to any bankruptcy filing considerations. The important thing is to be honest and to disclose fully and accurately.

Avoiding Unnecessary Transfers 

Once you know you are planning to file for bankruptcy, it is best to avoid making any transfers of property or assets. If there is a need to make a transfer — such as to an adult child who needs financial assistance — it is important to discuss any transfer with a lawyer before you do it. Likewise, avoid gifting any assets or property in the time leading up to your bankruptcy filing.

Recognizing Penalties for Concealing Assets 

Sometimes debtors think it is in their best interest to attempt to conceal or hide property by transferring it — so that it is not liquidated in a Chapter 7 case, or so that it is not counted in determining the amount of a Chapter 13 repayment plan. However, any kind of attempt to hide assets can have severe consequences. Not only can you lose your ability to receive a discharge, but depending on the details, you could even face criminal charges in connection with bankruptcy fraud.

Contact a West Palm Beach Bankruptcy Lawyers Today 

If you are considering bankruptcy, it is essential to seek advice from an experienced West Palm Beach bankruptcy attorney at Kelley, Fulton, Kaplan & Eller before you make any asset transfers. As we have discussed, transferring property to friends, family members, or other entities just prior to a bankruptcy filing can give the appearance of fraud with the intention of concealing assets. To avoid a situation in which there are any concerns about bankruptcy fraud or an intention to hide assets, you should speak with a lawyer. Contact us today to learn more about actions you must take, as well as those you should not take, in advance of a consumer bankruptcy filing in South Florida.

Sources:

law.cornell.edu/uscode/text/11/548

law.cornell.edu/uscode/text/11/544

justice.gov/archives/jm/criminal-resource-manual-858-fraudulent-transfer-or-concealment-18-usc-1527#:~:text=Subsection%20(7)%20of%20Section%20152,of%20the%20offense%20is%20sufficient