Property transfer before filing bankruptcy is usually a bad idea and almost always causes more harm than good. Under Section 548 of the Bankruptcy Code, the Trustee may avoid or set aside a transfer of property made by a debtor if there is an actual intent to defraud, hinder or delay creditors or if the debtor was insolvent at the time of transfer and did not receive less than full value.
Fraudulent Conveyances and Bankruptcy
The typical examples include the transfer of a car or real estate to a family member or friend. Let’s say you have a 1969 Camaro which is owned outright. You transfer the title to your brother to hold for you until your bankruptcy is over. Bad idea. The Trustee would likely sue your brother to get the car back. The exemptions you may have had to keep the car are gone. After all, your exemptions are for you and not cars owned by your brother. That backfired. Another example is selling real estate to a family member for less than what it is worth to someone you know. If you don’t get what it is worth and you give someone a sweetheart deal, it is probably a fraudulent transfer. Even a gift could be a fraudulent conveyance if you were insolvent at the time of the transfer.
State of Michigan versus Federal Law
The Bankruptcy Code gives the Trustee up to two years before the bankruptcy filing to avoid any transfers. Under Michigan law, a creditor has up to six years to set one aside. The Trustee can elect to use either the State or Federal law, whichever gives a bigger advantage.
Bankruptcy Lawyers Can Help
Because most bankruptcy filers can exempt all of their property and possessions, there isn’t any need to transfer property to another person to hold for you. An experienced bankruptcy attorney will know how to analyze the impact of any transfers. Keep in mind, you have a duty to disclose all transfers so please don’t wonder about not telling anyone. That’s a good way to lose the property and get denied your discharge.
“F” also stands for:
- Family Farmer/Fisherman
- Future Flow Agreement
- First
- Forms
- Foreclosure
- Foreclosure
- Forgiveness of Debt
- Failure Begets Success
- Financial Fatigue
- Fraud
- Foreclosure
Christopher McAvoy is a Taylor, Michigan attorney and consumer bankruptcy lawyer who helps people in the Downriver area file Chapter 7 and Chapter 13 Bankruptcy. To find out more about bankruptcy, click here for contact info.
