What property do I get to keep in bankruptcy is the primary concern of nearly everyone that files for bankruptcy. For those unfamiliar with the bankruptcy process, the US Bankruptcy Code grants the ability for debtors to safeguard certain types of property. These safeguards or circle of protection are known as “exemptions”. Using exemptions is the only true way to protect your property during bankruptcy. Unfortunately, some individuals try to game the bankruptcy system by secretly transferring property or gifting the property to family or friends. Knowingly hiding property transfers and gifts when filing bankruptcy is considered fraud and can end up with dire consequences including fines and jail time. Property transfers and gifts in bankruptcy are legal but must be disclosed to the Bankruptcy Court and the Bankruptcy Trustee in your bankruptcy case.
If you plan on filing bankruptcy in the near future, you should know that you must disclose any property transfers made within the previous two years when you file. You should double check with a bankruptcy attorney where you live, however, as some bankruptcy courts look back further for transfers of property. Whether the fraud was actual or constructive, the bankruptcy trustee will file a lawsuit against your bankruptcy case. If the trustee wins, they can and will cancel property transfers and recover the property to be sold to satisfy creditors.
Disclosing Property Transfers
The Statement of Financial Affairs (SOFA) form accompanies your bankruptcy petition and allows you to disclose any property transfers or gifts. Additionally, it’s likely you’ll be asked about any recent property transfers during the 341 Meeting of Creditors. There’s not much advice here, other than being 100% straightforward and honest with the courts, as you can get in serious trouble for purposely omitting information or lying. Lastly, if you have already transferred property before filing bankruptcy, it’s very important to mention these to your bankruptcy attorney.
Trustee’s Gathering of Assets
Even if a transfer has been made legally and disclosed, the trustee may still go after the property through an adversary proceeding, which is a form of litigation against your bankruptcy. If you were insolvent at the time of the transfer and you didn’t receive reasonable equity, there’s a good chance the Bankruptcy Trustee will pursue getting the property back to divide equally amount all creditors. Your bankruptcy trustee may also file a lawsuit to take back any large payments made to any of your creditors leading up to bankruptcy.
Bankruptcy Lawyer in Dayton
Working with a bankruptcy attorney in Dayton OH is the best way to ensure that you keep any property that you don’t want to give up during a Chapter 7 or Chapter 13 bankruptcy case. Additionally, an experienced bankruptcy attorney will be able to give you legal advice regarding property transfers and gifts, before, during, and after your bankruptcy process.