Can I transfer ownership of my car before filing for bankruptcy? 34 Answers as of January 18, 2013

I want to file for bankruptcy but I do not want to lose my car. Can I sell it to a relative and transfer the ownership before I file so that I can keep it? I want to sell it for a little bit of money then I will buy it back after bankruptcy is over. Is that legal?

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Bankruptcy Law Center
Bankruptcy Law Center | Bill Zurinskas
It is unwise to transfer any significant asset without reasonable consideration immediately prior to filing bankruptcy without first talking to an experienced bankruptcy attorney. The transfer may be considered fraudulent or preferential and can be reversed by the trustee. It may also be grounds for a denial of discharge, which is the worse that can happen to a debtor in bankruptcy.
Answer Applies to: Colorado
Replied: 1/27/2011
Law Offices of J. L. Haddock, PLLC
Law Offices of J. L. Haddock, PLLC | Jared L. Haddock
Do not do this. Let me be very clear on this point, because there is a great deal of misinformation out there about such transfers. This is Bankruptcy fraud.a virtual textbook definition of it, in fact. Transferring any asset to a friend or relative in contemplation of Bankruptcy for less than true fair market value is fraud. The Trustee in you Bankruptcy case will find out about it and it can lead to all kinds of consequences you do not want. These could include having your debts declared forever non-dischargeable and/or criminal prosecution under federal the federal law as a felony offense. I don't know about you, but I have never seen any car worth that kind of risk.

In every instance I can imagine, you are far better off disclosing that you own the asset and exempting it from liquidation (to the extent that you can). There are some cases in which you may choose to "self liquidate" and sell the car for fair market value and use the proceeds to live off of if you have insufficient income to support yourself.then file for Bankruptcy when the money has been spent (known as a "spend down"). Keep in mind that doing so is less about the Bankruptcy and more about survival. A good test to consider whether the transaction is wrongful or not is to consider the anticipated result. If it involves a Chapter 7 Bankruptcy and ends in you getting the asset back at all or keeping it safe for a friend or relative, it is probably a fraudulent transfer.

In order to fully protect your assets, I urge you to disclose all of them to your Bankruptcy attorney prior to filing your case or in any way transferring them. Most reputable Bankruptcy attorneys like myself will offer a free consultation and can advise you on how best to protect everything you own.
Answer Applies to: Michigan
Replied: 1/27/2011
Mettias & Associates
Mettias & Associates | Jimmy Philip Mettias, Esq
Thank you for submitting your question to our firm, Mettias & Associates, in regard to your bankruptcy question. It appears that you wish to keep your car by selling it cheaply to a family member, then buying it back after bankruptcy. In some cases, depending on the facts of your case, the Bankruptcy Trustee will allow you to keep your car as a necessity of life. Please contact our office to schedule a free consultation to review your legal options in regard to your vehicle.

Please be advised this response does not create an attorney client relationship, and does not constitute legal advice. If you have a legal problem, you should meet with a local attorney in your area.
Answer Applies to: California
Replied: 1/26/2011
Law Office of Harry L Styron
Law Office of Harry L Styron | Harry L Styron
Any transfer to a relative within one year prior to filing a Petition must be disclosed on the Petition, and if you file a Chapter 7 Petition, is subject to being set aside by the bankruptcy trustee.
Answer Applies to: California
Replied: 1/26/2011
Carballo Law Offices
Carballo Law Offices | Tony E. Carballo
Selling a car for less than fair market value means you are giving away property that is going to be part of the bankruptcy estate upon filing. That means the trustee can take it from the person to whom you transferred it and sell it to pay your creditors. Most importantly, such a scheme could considered bankruptcy fraud which is a crime and can cause your bankruptcy case to be dismissed or you discharge denied. Any transfers to a relative within a year of filing for bankruptcy has to be disclosed in the Statement of Finacial Affairs. Failure to disclose it could also be considered perjury since you are signing the bankruptcy petition under penalty of perjury. You can keep a car that has a value of about $3,500 plus you have what is called the wildcard in the amount of $23,250 to exempt any additional value of the car and other property such as cash you have and bank accounts. If you do not have enough exemptions to protect all your property then you need to consider whether you should file a Chapter 7 bankruptcy case. If you have too much unexempt property you may have to file a Chapter 13 bankruptcy case and pay in a Chapter 13 Plan the value of property that you can not exempt so that you can keep it. Be careful with what you do since the consequences of not being truthful and accurate in your bankruptcy petition is punishable by fines and imprisonment plus you will not get your discharge if discovered doing something illegal or not in good faith. Make sure you discuss your case with an experienced bankruptcy attorney before doing anything. You cannot get out of a Chapter 7 case after filing without court permission and the trustee might oppose allowing you to dismiss your case if there is unexempt property that the trustee can take to pay your debts.
Answer Applies to: California
Replied: 1/26/2011
    Law Office of Aaron Nielson
    Law Office of Aaron Nielson | Aaron Nielson
    Meet with an attorney before doing anything.

    There are exemptions available that might protect your car. You hire an attorney because they know the exemptions and how to use them. What you are proposing sounds wrong all over.
    Answer Applies to: Washington
    Replied: 1/26/2011
    Judith A. Runyon, Esq. Attorney at Law
    Judith A. Runyon, Esq. Attorney at Law | Judith A. Runyon
    No, that would be fraud.
    Answer Applies to: California
    Replied: 1/26/2011
    Uriarte & Wood, Attorneys at Law
    Uriarte & Wood, Attorneys at Law | Robert G. Uriarte
    Absolutely not ok. What you are proposing is actually ab bankruptcy crime. There are ways to protect assets, but you need to sit with a lawyer and see what strategy will fit your needs. Transferring assets in contemplation of filing could result in a denial of your discharge and possibly criminal prosecution.
    Answer Applies to: California
    Replied: 1/26/2011
    The Pedigo Law Corporation
    The Pedigo Law Corporation | Brian T. Pedigo, Esq.
    No, you may not do this. This would be a fraudulent transfer. There may be other legal ways to keep your car, however. Consult a bankruptcy attorney.
    Answer Applies to: California
    Replied: 1/26/2011
    Javia & Moore
    Javia & Moore | Marisa-Andrea Moore
    Any transfer of property for less than market value before filing bankruptcy is considered fraud. The FBI and IRS does prosecute bankruptcy fraud so do not do this. You could end up paying huge fines, losing your car AND going to prison. When you file bankruptcy, you are allowed a number of exemptions that allow most people to keep their property. Please consult with a bankruptcy attorney. You may be able to keep your car without running the risk of jail and fines.
    Answer Applies to: California
    Replied: 1/26/2011
    Law Offices of Lady Justice
    Law Offices of Lady Justice | Mona Patel
    You do not have to lose your car if you file bankruptcy. You can keep it by doing a reaffirmation agreement which states you will continue making loan payments if you have any.

    Also if you do transfer ownership it has to be at least one year prior to filing bankruptcy and definitely not to a relative. But this would be fraud on the bankruptcy court and you could get into major trouble.
    Answer Applies to: California
    Replied: 12/15/2010
    Mankus & Marchan, LTD
    Mankus & Marchan, LTD | Tony Mankus
    Transferring title to a car before bankruptcy for less than full consideration with intent to buy it bank after bankruptcy would be fraudulent. However, you are generally entitled to an exemption in bankruptcy for a vehicle - $2,400.00 in the case of Illinois if the vehicle is in your name alone.
    Answer Applies to: Illinois
    Replied: 12/15/2010
    William C. Gosnell, Attorney at Law
    William C. Gosnell, Attorney at Law | William C. Gosnell
    No, one of the questions that you must answer truthfully is have you transferred anything within the last one year for less than the full value. So you could transfer it then wait one year and file. There is an exemption in Tennessee for personal property.
    Answer Applies to: Tennessee
    Replied: 12/15/2010
    David R. Fondren, Attorney at Law
    David R. Fondren, Attorney at Law | David R. Fondren
    Only if you wish to move to a 6x8 cell. That is clear bankruptcy fraud and a felony. The look back under bankruptcy law is 2 years. Missouri has a 4 year look back and can undo what you did on top of criminal charges.
    Answer Applies to: Missouri
    Replied: 12/15/2010
    George Hoselton Bankruptcy Attorney
    George Hoselton Bankruptcy Attorney | George Hoselton
    Any transfers need to be disclosed in your bankruptcy petition. If you sell anything right before filing bankruptcy it needs to be sold for fair market value and you must keep receipts for the sale and how the proceeds are spent. The scenario you are considering could get you into trouble. There are exemptions that allow you to keep a car with a limited amount of equity. Check with an attorney in your state to find out what the exemptions are. If your equity falls within the exemption, you should be able to keep the car as long as you can afford the payment.
    Answer Applies to: Oregon
    Replied: 12/15/2010
    Janet A. Lawson Bankruptcy Attorney
    Janet A. Lawson Bankruptcy Attorney | Janet Lawson
    Depending on the value this could be a problem. you should consult a lawyer. if your case is done right the odds are that you can keep the car. and, you must disclose the transfer anyways, so no point in doing something inherently fraudulent.
    Answer Applies to: California
    Replied: 12/15/2010
    Steven D. Keist, Attorney at Law
    Steven D. Keist, Attorney at Law | Steven D. Keist
    No that is considered a preferential transfer.
    Answer Applies to: Arizona
    Replied: 12/15/2010
    DiManna Law Office, LLC.
    DiManna Law Office, LLC. | Dawn DiManna
    No, transfers or sale of assets need to be disclosed to the court. You may be able to use an exemption to protect your car, you should consult with a bankruptcy attorney to determine what is best for you.
    Answer Applies to: New Hampshire
    Replied: 12/15/2010
    Henry, DeGraaff & McCormick, P.S. | Jacob DeGraaff
    What you are proposing is a fraudulent transfer and can have serious repercussions not only for you but for the person you transfer the car to. In Washington, the law provides for exemptions which allow you to keep certain items of property in the bankruptcy. It is very unusual that a car would not be exempt in a bankruptcy, so you could be worrying for nothing. You should meet with a qualified bankruptcy attorney who can help you determine what you stand to lose, and what you stand to gain, by filing bankruptcy.
    Answer Applies to: Washington
    Replied: 1/18/2013
    Law Office of L. Paul Zahn
    Law Office of L. Paul Zahn | Paul Zahn
    This would likely be considered a fraudulent transfer of an asset. There are exemptions which allow people to keep some of their property. Speaking with an bankruptcy attorney can help you determine if you can legally keep your vehicle.
    Answer Applies to: California
    Replied: 12/14/2010
    Royzman Law Firm
    Royzman Law Firm | Natella Royzman
    That is definitely NOT legal and can lead to a lot of bad consequences. Talk to a bankruptcy attorney - you may be able to legally exempt your car.
    Answer Applies to: California
    Replied: 12/14/2010
    Ursula G. Barrios Law
    Ursula G. Barrios Law | Guillermo Machado
    This is not legal. In fact, it's considered a fraudulent transfer and the courts can slam you for it. In California, you can keep up to $27,000 between cars and cash, so I would not sell it when you can probably simply protect it and still file for bankruptcy.
    Answer Applies to: California
    Replied: 12/14/2010
    Gus Johnson Attorney at Law
    Gus Johnson Attorney at Law | Gus Johnson
    You cannot legally do this.
    Answer Applies to: South Dakota
    Replied: 11/18/2010
    The Shakoori Law Group
    The Shakoori Law Group | Rachelle Shakoori
    You should not transfer any assets before filing bk. You may be able to still keep the car and file bk depending on various factors. You should consult an attorney to get all the facts.
    Answer Applies to: California
    Replied: 11/17/2010
    Law Offices of Michael J. Berger
    Law Offices of Michael J. Berger | Michael J. Berger
    The scheme that you propose is not legal and will get both you and your relative sued by the Trustee in your bankruptcy case. Do not transfer anything for less than full fair market value before you file bankruptcy.
    Answer Applies to: California
    Replied: 10/27/2010
    Diana K. Zilko, Attorney at Law
    Diana K. Zilko, Attorney at Law | Diana K. Zilko
    Any transfer that you make prior to a bankruptcy will have to be disclosed to the Trustee, and the vehicle may be sought to be returned. In reality, most vehicles fall into the "exempted" category and are therefore able to be kept by you even though you file for bankruptcy. Unless you have a lot of property with high values, you will likely keep what you currently have.

    If you have any further questions, please let me know.
    Answer Applies to: California
    Replied: 10/25/2010
    Law Office of David P. Farrell
    Law Office of David P. Farrell | David Farrell
    Filing bankruptcy requires full disclosure of all of your financial affairs, including recent transfers. The bankruptcy trustee has the power to set aside transfers of property made before the bankruptcy filing, and will do so if s/he feels the transfer was fraudulent. In addition, transfers to family members or "insiders" may be more closely scrutinized by the trustee. In many cases, debtors get to keep most if not all of their property by claiming it exempt. Get some advice from an experienced bankruptcy attorney.
    Answer Applies to: California
    Replied: 10/23/2010
    Greifendorff Law Offices, PC
    Greifendorff Law Offices, PC | Christine Wilton
    NO! You can, in all likelihood, keep your car and still eliminate your debts. Consult an attorney before you commit fraud upon the court and land in jail for bankruptcy fraud.
    Answer Applies to: California
    Replied: 10/23/2010
    The Law Offices of Robert L. Driessen
    The Law Offices of Robert L. Driessen | Robert L. Driessen
    You can but the trustee can find that the sale was not legitimate take the car back and sell the car to pay off your creditors. So end of the day no its not legal.
    Answer Applies to: California
    Replied: 10/22/2010
    Sussman & Associates
    Sussman & Associates | Mitchell Sussman
    I would not recommend this course of action. Call a bankruptcy attorney for more detail.
    Answer Applies to: California
    Replied: 10/22/2010
    The Law Office of Mark J. Markus
    The Law Office of Mark J. Markus | Mark Markus
    It is legal if you sell it for fair market value. What makes you think you would lose it in a bankruptcy? Is the equity in the vehicle above the allowed exemption limits in your state?
    Answer Applies to: California
    Replied: 10/22/2010
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