Transfers Of Property
Transfers Of Property
Beware of transferred property to “insiders” (family members & friends)
Filing for bankruptcy allows you to start over while still keeping your property. Complete disclosure is essential when filing for bankruptcy protection. (in the spirit of what attorneys term "good faith").
The trustee and the court will look at any property transactions you made prior to filing bankruptcy as a major factor in determining whether or not your petition was filed in good faith.
The "preference period" or ninety-day "look back" at property transactions is the most typical method. This is a significant time frame for look back, but there are others to which you should pay close attention. Ten (10) years is the maximum allowed look back period for property transactions.
The 90-day look back: Preference
The purpose of the "preference" look back is to ensure that all of your creditors are given equitable treatment and that you did not favor one creditor over another when you were financially strapped. If you make a transfer while financially unstable within the ninety (90) days prior to filing for bankruptcy, the trustee might reject that transfer.
If the transferee was made to an "insider," the time limit is longer, one (1) year. After a transfer "avoidance," the trustee will take back whatever you gave to your creditors and utilize that money or asset to pay your creditors.
The 2-3 year look back: Actual or Constructive Fraud
When determining actual or constructive fraud, your actions before, during, and after insolvency will be considered. Specific transfers that your creditors might suspect you performed in order to conceal assets can be avoided. (The trustee may collect and liquidate the funds or asset in order to satisfy the debtor's creditors.) It is possible to avoid any transfers of property done for less than the asset's fair market value while you were insolvent. Any compensation given to an "insider" in exchange for his or her services is also included here. Additionally, it also includes forcible or voluntary transfers. If your bank has taken action known as a "set off" against an account, the assets may be reclaimed and used to pay for your bankruptcy.
The 10-year look back: Actual Fraud
If the bankruptcy court finds that you transferred property with the aim to obstruct, delay, or deceive a creditor during the ten (10) year period before the date you filed your petition for bankruptcy, the trustee may seek to have the transfer avoided. The trustee may undo any transfer to a self-settled trust during this look back period.
If the bankruptcy court determines a committed fraud, it will be followed by severe repercussions. You will be unable to get a discharge of your outstanding debts, and your assets will be subject to sale. Most people find this aspect of bankruptcy the most terrifying. However, if you tell the truth to the court, you have nothing to worry about.
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