Have you transferred any property out of your name before filing your bankruptcy?

There are three scenarios that could negatively affect your case if you have done so.

 Scenario 1: Recent Transfer with No Fraud Involved

The court finds that you transferred the property with no intent to commit fraud.

Even without committing fraud, it is still possible for your bankruptcy trustee to avoid the transfer if it occurred recently. The amount of time depends on the laws of your state, but typically if you have transferred property out of your name within two years of filing your bankruptcy, the trustee can avoid the transfer. This means that he can take the property back, sell it, and divide the proceeds of the sale among your creditors.

Scenario 2: Actual Fraudulent Transfer 

The court decides that you intended to defraud your creditors by transferring property out of your name.

If so, the court might choose to completely deny your bankruptcy discharge. This is devastating to a bankruptcy case.

Your trustee will have to find that you had the intent to either defraud, hinder, or delay your creditors, or you intentionally hid, harmed, or destroyed your assets. If he finds this to be the case, he is allowed to object to your bankruptcy and request the court to deny your bankruptcy discharge.

Scenario 3: Constructive Fraudulent Transfer

The court finds that you committed a constructive fraud because you were insolvent and you intentionally too took on more debt than you could afford, or you transferred property for less than its value.

If so, the trustee could avoid the transfer, sell the asset, and give any money made through the sale to your creditors.

 Are There any Scenarios where I Don’t Lose an Asset or Receive a Denial of Discharge?

Clearly, transferring property before filing bankruptcy has the potential for many serious consequences. Therefore it is rarely a wise decision to transfer property before filing, especially if you are doing it to defraud your creditors or hide assets.

However, this does not necessarily mean that all is lost if you transferred property out of your name before filing. If the asset is exempt under the bankruptcy law, or if the asset you transferred had no equity, then it is extremely unlikely that the trustee will try to avoid the transfer.

Even if your asset had value when it was transferred, as long as there are no issues with fraud and it was not a recent transfer, the trustee will normally not take issue with the transfer. If it  was a recent transfer, it may make sense to consider delaying the filing of your bankruptcy until it passes the two year threshold described above.

Finally, if your property transfer is going to present potential problems for your bankruptcy, it might be possible to undo your transfer before filing. This will render it a non-issue for your case.

 Your Attorney Knows Best

Any transfer of property prior to filing can cause many complications for your bankruptcy. It is highly recommended that you seek the expertise of an experienced bankruptcy attorney before making any decisions regarding either property transfers, the filing of your bankruptcy, or both.