Can I Hide or Transfer My Most Valued Items to Friends or Family Prior to Filing Bankruptcy?
One of the largest concerns of anyone filing for bankruptcy is what will become of their personal possessions in a Chapter 7 bankruptcy. After consulting with a Cleveland OH bankruptcy attorney, some people may have the desire to hide or sell assets to prevent the trustee from seizing them. However, these efforts should be avoided as they can constitute bankruptcy fraud and have serious legal ramifications.
To learn more about transferring assets before bankruptcy and how to avoid making mistakes that could hurt your case, contact a bankruptcy attorney at Benson Law Firm. We can answer your questions guide you through the bankruptcy process.
Can I Just Give Away My Assets?
One of the most common ways that people attempt to hide assets is by simply give them away to friends or family, or not disclose them to their bankruptcy attorney.
While this may seem like a simple way to hide assets, the trustee often finds out about attempts to hide assets and can file a case against you that can lead to jail time and a hefty fine. There are alternatives that are safer and more effective, with a little bit of planning with your bankruptcy attorney.
What About Selling Assets?
Now, you may be thinking that selling some of your assets to relatives or friends for pennies on the dollar may be another strategy worth pursuing. This will also not fly with the trustee.
For example, if you have a $50,000 investment property that you sell to your brother for $5,000, the court will most assuredly void the sale and attempt to liquidate the property at fair market value. But what happens if you sell that property at fair market value to pay off debts to family and friends? Well, the trustee will view this as giving preference to certain creditors and will likely file an action against them to recover the money and distribute the funds to creditors.
However, if you sell the property at a fair market value and show the trustee documented evidence that you used the proceeds to pay off a wide range of debts, as well as pay for necessary expenses, the trustee may allow that sale to go through. However, be sure to consult your attorney before taking such actions.
You Have More Options When It Comes to Cash
When it comes to cash, you may have a few more options. It is acceptable to spend cash to acquire basic items or pay your attorney before entering into bankruptcy. It may also be permissible to invest in exempt retirement assets such as IRAs and 401ks.
Just be sure to consult with your Cleveland OH bankruptcy attorney on such transfers. Also, make sure to document all of these transactions to prove where the money has gone.
What If I Have Already Started Transferring Assets Before Bankruptcy?
If you have already transferred assets, even innocently, make sure you let your bankruptcy attorney know about the transfer right away.
The bankruptcy trustee will usually first void the transfer, then bring the assets back into the bankruptcy estate. The trustee can reach out to the recipient of the transfer and make them turn over the asset to the bankruptcy court. They can then determine whether the value of the assets could benefit your creditors.
Usually, once the bankruptcy trustee has taken care of the issue, your case will proceed as normal. But if the court believes that you were intentionally trying to hide your assets, it may decide to deny your discharge.