The Bankruptcy Trustee Can Avoid Fraudulent Transfers

It is a common misconception that bankruptcy is as easy as transferring all of your property to your friend while you discharge your debts and get your property back later. Like any other illegal act, you might get away with it, but if you get caught it will go very wrong. There is no reason to expose yourself to this kind of liability. The right bankruptcy lawyer can show you many ways to keep your assets and still discharge your debt legally. A quality bankruptcy attorney is very affordable and worth every penny. You can schedule a free consultation now, but let’s talk about fraudulent transfers.

According to the Bankruptcy Code section 548, the trustee can avoid a fraudulent transfer or obligation of the debtor within one year prior to the filing of a bankruptcy petition, or much longer according to the fraud statutes of the state. A “transfer” can be disposition of property or the granting of a mortgage or lien. B.C. 101 (54). It can be done voluntarily or by foreclosure or suit. Essentially, any transaction that looks like it could be trying to hide assets can be fraudulent. The court has identified five warning signs. They call them badges of fraud, and they come from In re Kaiser , 722 F.2d 1574 (2d Cir. 1983). The court will assume you intended to defraud if any of these are present.

The most obvious is if there was inadequate consideration received for the transfer. Did you give the property away without getting anything in return? The court will assume you were fraudulent instead of benevolent.

Another equally obvious indicator is if the transferee was a close friend or relative. If you trust the person receiving the property enough to give it back, the court will assume that is what is happening.

If you continue to enjoy the use of the property after the transfer, the court will assume it was not a real transfer. For example, if you transfer the Jet Ski for no consideration ($) but still get to use it whenever you like. Similarly, if you transfer to a corporation you own or control, it has the same effect.

The court will also consider the timing of the transfer. If it happened after your financial problems started, that would seem to be motivation.

If you receive less than full value and you were insolvent at the time of the transfer, that’s fraud. B.C. 548. The trustee could get your stuff back and still not allow a discharge, ever. Worse than that, you could go to prison for the fraud.

Don’t do this yourself. An affordable, quality bankruptcy lawyer can show you how to legally discharge your debt, and still likely keep most or all of your assets. GET FREE HELP TODAY. Payment plans are available and the fees are affordable. The best part, the consultation, is free! Call Now.