Transferring property before bankruptcy is risky business!
Lately, a number of clients coming to see me have just transferred real property (or their interest in real property) to a family member or friend, or they are inquiring about transferring their property to a family member or friend – and, of course, for no money in return. AND, they want to file bankruptcy ASAP. Bad decisions and bad ideas! Bankruptcy law has several provisions that penalize a transfer made with the intent to hinder, delay, or defraud creditors. Any transfers made within two years of filing bankruptcy (and in some instances – further back than that) the bankruptcy trustee can undo those tranfers pursuant to his avoidance powers under Section 548 of the Bankruptcy Code.
I recently turned down filing a case for a potential client who, after several months of being laid off from work and no foreseeable job offer coming, decided to transfer a second parcel of land (approximately 20 acres) – not his homestead to his son. He wanted to protect his land from his creditors. Unfortunately, this is considered a fraudulent transfer and the trustee could undo the transfer. He, of course, was sick to learn that his actions had only made matters worse for him since he is unable to file aChapter 7 bankruptcy now and keep his land.
If you are thinking about filing for bankruptcy and are thinking about transferring or giving property of any value to someone else, PLEASE talk to a bankruptcy attorney before you take that action.
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