Are pre-bankruptcy transfers legal? 12 Answers as of October 07, 2014

Debtor received last $200 payment from buyer of his car and transferred the title about 1 week before filing bankruptcy. The car was worth $1700, total sale was $1,800. Is this okay?

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Freeman Law Group, LLC
Freeman Law Group, LLC | Derek Freeman
It depends on whether this was an arms-length transaction. If it was a transaction between family members, the assumption is that it was not arms-length, and such a transaction can be challenged. Otherwise, as long as the debtor disclosed the transfer, it is perfectly legal. The debtor will also need to disclose how s/he spent the money, if asked by the trustee.
Answer Applies to: Colorado
Replied: 10/7/2014
A Fresh Start
A Fresh Start | Dorothy G Bunce
It would have helped if you had indicated whether or not there was any relationship between the debtor and the party buying the vehicle. In a sale to a neutral private party or dealer, this might not be any problem at all, but if the sale was to someone related to the debtor, it could have serious consequences.
Answer Applies to: Nevada
Replied: 10/1/2014
Ronald K. Nims LLC | Ronald K. Nims
I'm not clear on exactly what transpired from your description. Debtors are not allowed to make gifts or sell items for less than fair market value before a bankruptcy.
Answer Applies to: Ohio
Replied: 9/30/2014
The Law Office of Darren Aronow, PC
The Law Office of Darren Aronow, PC | Darren Aronow
She just has to disclose it in her bankruptcy petition but it should be fine if there was no fraud.
Answer Applies to: New York
Replied: 9/30/2014
Janet A. Lawson Bankruptcy Attorney
Janet A. Lawson Bankruptcy Attorney | Janet Lawson
He received value for the car. He can do it.
Answer Applies to: California
Replied: 9/30/2014
    GARCIA & GONZALES, P.C.
    GARCIA & GONZALES, P.C. | Richard N. Gonzales
    No problem with good faith transfers like the one you described. Chapter 7 Trustee will ask you what you spent the money on, and may require proof that you spent the money before your filed your BK. Did you get the advice of counsel before doing this transfer, or are you just rolling the dice?
    Answer Applies to: Colorado
    Replied: 9/30/2014
    Garner Law Office
    Garner Law Office | Daniel Garner
    As long as you disclose it, the sale you described should not be a problem.
    Answer Applies to: Oregon
    Replied: 9/30/2014
    Steele, George, Schofield & Ramos, LLP
    Steele, George, Schofield & Ramos, LLP | Alan E. Ramos
    Without knowing more, it seems proper to me.
    Answer Applies to: California
    Replied: 9/30/2014
    Law Office of Andrew Oostdyk
    Law Office of Andrew Oostdyk | Andrew Oostdyk
    The Bankruptcy Code requires that all transfers of property be disclosed in the Bankruptcy filing through the Statement of Financial Affairs. This transfer will then be verified by the Trustee during the 341 Meeting of Creditors. As long as the transfer of property was conducted in good faith, the transfer will be allowed. Debtors will run into trouble when transferring property to insiders (Family, friends, etc.) for less than fair market value. If a fraudulent transfer has been made, the Trustee has the ability to void the transfer, take possession of the property and liquidate it for the benefit of your unsecured creditors.
    Answer Applies to: Texas
    Replied: 9/30/2014
    D.J. Rausa, Attorney at Law | D.J. Rausa
    Disclose the transfer and exempt the car.
    Answer Applies to: California
    Replied: 9/30/2014
    Thomas Vogele & Associates, APC | Thomas A. Vogele
    Yes, although all transfers in the 90 days prior to a bankruptcy can be challenged. It sounds like the exchange was for equivalent value so you should be fine.
    Answer Applies to: California
    Replied: 9/30/2014
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