Can I sell my assets prior to filing for bankruptcy? 30 Answers as of July 04, 2013

I have some stocks as my only assets. If I sold them and showed no assets when filing for bankruptcy, would that be viewed as fraudulent?

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Dan Shay Law
Dan Shay Law | Daniel Shay
It must be listed in your Bankruptcy as a transfer. Check into the exemptions, in California you can keep $23k of anything legal under the 703 Wild Card Exemption.
Answer Applies to: California
Replied: 7/14/2011
The Law Office of Marvin Wolf
The Law Office of Marvin Wolf | Marvin Wolf
I won't get too specific since this is just general information, not legal advice. The general answer may sound confusing because for most attorneys, the gut answer is no and we all want to discourage this kind of behavior because hiding assets is a bankruptcy crime and people go to jail for it. The actual answer is: "Not necessarily. It depends" It really depends on the debtor's motive and the amount of the transaction. There's a kind of informal smell test - "If someone owed you money and did that to you, would YOU think it's unfair that you didn't get paid?" If the answer is yes, then you shouldn't do it. If the answer is no, you still shouldn't do it without first consulting your attorney. Some hypothetical examples (just general ideas, not a legal opinion): If you sold the stock to hide the money from creditors, no matter what the amount, it won't pass the smell test and could be deemed fraudulent. But if you sold some stock to pay your lawyer to file your bankruptcy because that's the only way you could pay him - and you listed the transaction, that would generally pass the judge's smell test - that's not considered hiding an asset or defrauding a creditor. If you needed emergency surgery and the doctor would only take cash, that too should pass the smell test for fraud (although there might be a "creditor preference" problem). If it's a few hundred dollars and you needed it to pay for rent or food well, you get the idea. If you change some non-exempt assets into exempt assets and are not too greedy about it, that might be okay - it's called exemption planning and to some extent lawyers are allowed to counsel you regarding this. Each transaction is different and it's more art than science. But one thing is for sure - it is better to ask the lawyer first before doing it, rather than doing it first and then telling him - that could definitely delay or even torpedo your filing. If you do it first and then tell your lawyer because you knew your lawyer would say no if you told him first - there's a good chance your lawyer will fire you, and he'd be right to do it. Remember: The "smell test" is not the law - it's just sort of a guideline for "good faith filings". Keep in mind that you are allowed to keep some assets in bankruptcy - even some stock - it's called exemptions. It would be tragic to see a case dismissed because you hid something there was never any need to hide in the first place. Also keep in mind that the US Trustee's Office and the FBI investigate bankruptcy fraud. It's serious business. The majority of clients get to keep most if not all of their assets in bankruptcy because the exemptions are generous and most clients are sort of broke by the time they get to the lawyer anyway. Showing absolutely no assets is a red light to a trustee - everyone has something - even clothing - unless you are a nudist who walks to the meeting. Moral: List everything. Tell the attorney everything and let him figure out if something can't be exempted and what to do about it. A good lawyer doesn't break the law, and doesn't let a client break the law.
Answer Applies to: New Jersey
Replied: 7/12/2011
Mercado & Hartung, PLLC
Mercado & Hartung, PLLC | Christopher J. Mercado
The transfer would need to be scheduled, the Trustee would find out.
Answer Applies to: Washington
Replied: 7/4/2013
Law Office of Lynnmarie A. Johnson
Law Office of Lynnmarie A. Johnson | Lynnmarie Johnson
Yes, selling your stock just prior to bankruptcy would generally be considered fraudulent.
Answer Applies to: Michigan
Replied: 7/12/2011
Dearbonn Law Offices
Dearbonn Law Offices | Ajibola Oluyemisi Oladapo
Yes. It would be viewed as committing a fraud on the bankruptcy court.
Answer Applies to: Washington
Replied: 6/10/2013
    Rosenberg & Press
    Rosenberg & Press | Max L. Rosenberg
    So long as you can account for the proceeds of the sale of assets and still either exempt them, or show they went to the basic living expenses and necessities, you are ok. However it may be easier to exempt them in the form they are currently in.
    Answer Applies to: Connecticut
    Replied: 7/4/2013
    Bankruptcy Law office of Bill Rubendall
    Bankruptcy Law office of Bill Rubendall | William M. Rubendall
    All assets must be listed in a bankruptcy. Selling assets prior to filing for the purpose of hiding them, or hindering or delaying creditors may create a fraudulent transfer that can be set aside by the trustee. It might also jeopardize receiving a discharge.
    Answer Applies to: California
    Replied: 7/12/2011
    Law Offices of Sheryl S. Graf
    Law Offices of Sheryl S. Graf | Sheryl S. Graf
    In most cases, all of your assets are exempt from being sold to pay your debts, so there would be no need to sell your stocks. If you do sell them, you could possibly be converting exempt assets into non-exempt assets (cash over certain dollar amounts) which could be used to pay some of your debts. Further, you will be required to disclose details of the transaction. Transfers of property and sales of assets prior to filing for bankruptcy may create problems for you. If you are filing for bankruptcy, you must list everything you own (including your clothing, household items, etc.), and any interests or claims you are aware of (i.e., a claim that someone owes you money for injury to you or damage to your property). In California, there are two rather complicated sets of exemption codes to choose from. Typically, if your belongings don't fit under one list, then they fit under the other. In other words, you get to keep everything but your debts. The information presented here is general in nature and should not be construed to be formal legal advice, nor the formation of a lawyer/client relationship. You should contact an attorney in your area who is knowledgeable in bankruptcy proceedings for specific advice tailored to your particular circumstances.
    Answer Applies to: California
    Replied: 7/11/2011
    Judith A. Runyon, Esq. Attorney at Law
    Judith A. Runyon, Esq. Attorney at Law | Judith A. Runyon
    Yes.
    Answer Applies to: California
    Replied: 6/10/2013
    Ashman Law Office
    Ashman Law Office | Glen Edward Ashman
    The sale would have to be disclosed in your filing, and then the trustee would be very interested in where the funds went. The prefiling sale of assets almost always messes up a case, and the fact you asked tells me you are about to make a second mistake, filing without counsel.
    Answer Applies to: Georgia
    Replied: 7/11/2011
    Melinda Murphy Dionne, PC
    Melinda Murphy Dionne, PC | Melinda Murphy Dionne
    Any attempt to conceal assets would be considered a crime. If you sold stock, or any other assets, prior to the filing of your case you would be required to account for any proceeds received. If you were unable to explain what happened to the proceeds, you would be denied a discharge and could face criminal penalties. You must list all of your assets and all of your debts. Speak to an experienced bankruptcy lawyer who can help you develop a plan that will allow to maintain your assets and repay your debt.
    Answer Applies to: Alabama
    Replied: 7/11/2011
    The Schreiber Law Firm
    The Schreiber Law Firm | Jeffrey D. Schreiber
    What happened to the cash from the sale? That is an asset.
    Answer Applies to: California
    Replied: 7/4/2013
    Janet A. Lawson Bankruptcy Attorney
    Janet A. Lawson Bankruptcy Attorney | Janet Lawson
    It would if you did not disclose the sale or you sold them for less than fair market value. Talk to a lawyer... it might not be as bad as you think.
    Answer Applies to: California
    Replied: 7/11/2011
    Bird & VanDyke, Inc.
    Bird & VanDyke, Inc. | David VanDyke
    It is best not to sell the stocks prior to filing. If you do sell them you will be required to disclose the sale and how much money you received. The court will ask what you did with the money. Most people don't realize how much in the way of assets you can keep. You would probably be surprised. Talk to an attorney before doing anything.
    Answer Applies to: California
    Replied: 7/11/2011
    Eric J. Benzer, Attorney at Law
    Eric J. Benzer, Attorney at Law | Eric Benzer
    No, the word us FRAUD.
    Answer Applies to: Maryland
    Replied: 6/10/2013
    Law Offices of Michael T. Krueger
    Law Offices of Michael T. Krueger | Michael Krueger
    Yes, if it is within six months of filing. However, you may not need to do this. If your assets are held in a 401k or IRA these assets would be exempt from bankruptcy proceedings.
    Answer Applies to: California
    Replied: 7/11/2011
    Diefer Law Group, P.C.
    Diefer Law Group, P.C. | Abel Fernandez
    Yes. You can protect a certain amount of assets in your bankruptcy case. So, you should find out what the limits are before you sell. You might be able to protect the stocks. Selling them might make it worse.
    Answer Applies to: California
    Replied: 7/11/2011
    Law Office of Maureen O' Malley
    Law Office of Maureen O' Malley | Maureen O'Malley
    Yes. Absolutely fraudulent. Remember you can exempt certain assets and you can do pre-BK planning, so go see a good lawyer and protect yourself fully.
    Answer Applies to: Virginia
    Replied: 7/11/2011
    Tucker Legal Clinic
    Tucker Legal Clinic | Samuel Tucker
    The sale of stock shares or other assets simply converts the assert to cash on hand. Concealing assets in bankruptcy case is illegal. Assets can be converted to exempt property with good pre-filing planning.
    Answer Applies to: Mississippi
    Replied: 7/11/2011
    Law Office of Harry L Styron
    Law Office of Harry L Styron | Harry L Styron
    One question on the petition requires you to state under oath all of the assets you have disposed of for the two years prior to filing the Petition. To fail to disclose such a disposition is (a) fraudulent and (b) therefore a bankruptcy crime, punishable as a federal felony.
    Answer Applies to: California
    Replied: 7/11/2011
    Law Office of Xochitl Anita Quezada
    Law Office of Xochitl Anita Quezada | Xochitl Anita Quezada
    If it is to pay creditors and you can prove that, then it is not fraudulent.
    Answer Applies to: California
    Replied: 7/4/2013
    The Law Offices of Alan M. Laskin
    The Law Offices of Alan M. Laskin | Jared B. Gaynor
    Yes - and you would still have assets in the form of cash.
    Answer Applies to: California
    Replied: 6/10/2013
    Carballo Law Offices
    Carballo Law Offices | Tony E. Carballo
    Yes because you were required to disclose the transfer of property (stocks) in the Statement of Finacial Affairs and account for the funds received from the sale. Therefore, by not telling the truth in the petition other documents filed you committed perjury (since you took an oath to tell the truth and didn't) and it is also fraudulent because you omitted relevant information about your financial assets.
    Answer Applies to: California
    Replied: 7/11/2011
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