The transfer or sale of property is one of the most common topics I discuss with potential clients. I’d like to take the opportunity to discuss this issue in this blog and hopefully provide answers to some common questions.
What Property Transfer Includes
When an individual files for bankruptcy relief, he or she is require to disclose to the Court the sale or transfer of any real or personal property that occurred within 2 years before the date of filing for bankruptcy. Real property is considered to be any real estate, whether that is vacant land, a house, or a whole subdivision. Personal property is every other type of property from vehicles to boats or financial accounts. Personal property also includes any intangible property such as a trademark or copyright. The Court requires you to disclose not only what was transferred and when, but also the value of the property transferred, the identity of who received the property, and whether that person is a relative of yours.
Why You’re Required to Disclose All Transfers and Sales
The reasons for this questioning is that the bankruptcy court has the authority to override any property transfer or sale that has occurred in that 2 year period, or going back 10 years if the transfer was to a relative or a business partner or insider. This part of the bankruptcy process is designed to prevent individuals from getting rid of valuable property in an attempt to conceal it from the Court.
If any transfers have been made out of your name to someone else in that time frame, then the Court will want to make sure that the transfer was for a fair value. If you have a vehicle that you want to give to your son or daughter, the Court would object to that transfer because you didn’t receive any payment in exchange for giving away something of value. For the transfer to be acceptable, you would need to be able to show the court that you were paid a fair value for the vehicle and be able to account for what you did with the proceeds you made from the sale. Otherwise, the Court could consider you to still be the owner of the vehicle and count the vehicle’s value against you in your bankruptcy case.
The details involved in property transfers leading up to a bankruptcy case can become very complicated quickly. If you’re in financial difficulty and considering selling property as a method of making money quickly, I’d strongly advise you to speak with an experienced bankruptcy attorney first. Even if you aren’t considering bankruptcy, the sale or transfer of property can affect your ability to file bankruptcy for years to come.
At Bond & Botes, our attorneys have years of experience helping people plan a path back to financial stability. We offer free initial consultations at each of our conveniently located offices in Alabama, Tennessee, and Mississippi.