What If I Sold Or Gave Away Property Before Filing Bankruptcy?
If you have sold or given away real estate, cash, cars or other assets during the six years before you file bankruptcy in New York state, you need careful legal advice before filing your case. Bankruptcy courts will scrutinize your finances for anything that even remotely looks like fraud.
If you have sold or transferred assets in the past six years and are considering bankruptcy, please be sure to consult an experienced bankruptcy attorney. I would be happy to discuss the issue with you.
I am bankruptcy attorney Peter Scribner, Esq. From my office in Rochester, New York, I have been helping individuals and families throughout upstate New York get a fresh start through Chapter 7 and Chapter 13 bankruptcy for more than 30 years. Filing Chapter 7 bankruptcy requires an in-depth understanding of bankruptcy laws.
Determining Your Risks In Bankruptcy
Certain transactions and asset transfers may lead to serious complications for you and your legal and financial future. As your lawyer, my goal is always to guide you through the bankruptcy process and take the guesswork out of filing bankruptcy.
I know when past financial decisions put you at additional risk. At our consultation, I will ask you several questions. Based on your answers, I will identify any additional problems with your bankruptcy filing and create a plan for moving forward. There are several common scenarios if you sold or gave away assets. Most notably, you should know:
- If you sold the asset for what it was worth, there is no bankruptcy problem, although the bankruptcy trustee may want to know what you did with the money you received.
- If you gave away an asset or sold it for less than its value more than two years ago, but less than six years ago, an important question will be whether that asset was exempt from creditors under New York law at the time you gave it away.
- If, after selling or giving away an asset, you have unexempt assets remaining sufficient to pay off all your debts, you probably do not have a bankruptcy problem (unfortunately, this is rarely the situation).
- If you gave away an asset to avoid paying your creditors, a bankruptcy trustee could go after the recipient of the transfer and get the asset back.
Where do we see these problems? Common examples: A husband deeds the house to the wife as part of a divorce; parents deed an interest in real estate to their kids as part of retirement planning; a debtor is sued and starts putting money into someone else’s bank account to avoid losing it; parents give a car to a child (maybe the child was paying on it all along). These are just a few examples, as there are many others.
Other Things To Know
Several legal precedents and terms are important to bankruptcy proceedings. A few notes on this are below.
- A fraudulent transfer under the Bankruptcy Code is giving away (or selling for less than its worth) an asset within TWO years of filing bankruptcy, EITHER with the actual intention of avoiding paying your creditors (that is called an intentional fraudulent transfer) or at a time when you did not have assets remaining after the transfer sufficient to pay your creditors (that is called a constructive fraudulent transfer, and your intent in doing the transfer is irrelevant.) Under the Bankruptcy Code Section 548, a bankruptcy trustee can go after the recipient of the transfer and get the asset back.
- A fraudulent conveyance is giving away (or selling for less than its worth) an UNEXEMPT asset within SIX years of filing bankruptcy, but before April 4, 2020, EITHER with the actual intention of avoiding paying your creditors (that is called an “intentional fraudulent conveyance”) or at a time when you did not have assets remaining after the transfer sufficient to pay your creditors (that is called a “constructive fraudulent conveyance” and your intent in doing the transfer is irrelevant.) A creditor can go after the fraudulent conveyance, and a bankruptcy trustee can use special powers to do the same thing (the trustee is empowered to avoid transfers a creditor could avoid under state law). The old fraudulent conveyance law in New York was replaced by the voidable transactions law effective April 4, 2020.
- A voidable transaction is giving away a valuable asset, or selling it for less than it is worth, after April 4, 2020 and within FOUR years of filing bankruptcy. It replaces ‘fraudulent conveyances’ under New York State law and is similar to a fraudulent transfer under the Bankruptcy Code, but with some differences, such as a four-year statute of limitations. A bankruptcy trustee is empowered to avoid these transfers as well.
This is a complicated area and needs careful analysis before you file bankruptcy.
Contact Me For Help
I have more than 30 years of experience working with New York families and individuals as they undergo bankruptcy proceedings. I can help you understand the full extent of your options.