Yes, you can sell your stuff before bankruptcy
Image Source: Pixabay.com
Debt can wreck your life if it grows out of control and Wilmington bankruptcy is one solution to cut yourself loose from obligations you can’t afford and get a fresh financial start. For those considering bankruptcy, it’s important to understand bankruptcy exemptions that can be used to protect assets and equity in assets. In some cases, it might be advantageous to sell off items before bankruptcy so long as you do it strategically and within the confines of bankruptcy law.
Yes, You Can Sell Your Stuff – but Follow the Rules
The first and most important thing to know about selling items before Wilmington bankruptcy is how you must set the price and how you must use the proceeds from the cash sale. When you file your bankruptcy case, the court wants to know about financial transactions in the last year or two before you filed. This is particularly critical with Chapter 7 bankruptcy since it offers the most sweeping form of debt relief.
You cannot transfer the title or give away assets to try and shield them from the bankruptcy process. You must sell your items for fair market value (or higher). Holding a garage sale is fine as long as you’re not selling valuable items for rock bottom prices. The court will also examine closely any transfer or sale of assets between you and close friends or family. Selling to a stranger for fair market value is an arms-length transaction that is not suspect.
However, selling your car to your aunt for half the retail value can result in accusations of fraud by the Wilmington bankruptcy court. Similarly, if you’re married but filing individual bankruptcy, giving assets to your spouse is suspect under bankruptcy law. The law offers ample protection from unaffordable debt so attempts to skirt the law can result in fines or even criminal punishment. A recent cautionary tale is celebrity bankruptcy filer Abby Lee Miller, who’s now in prison for cheating in bankruptcy.
Should You Sell Your Stuff Before Bankruptcy? Maybe …
Chapter 13 is the Wilmington bankruptcy option most often chosen by those with significant assets to protect. But Chapter 7 wipes out more debt and faster than Chapter 13 and allows you to start rebuilding your credit score faster. With Chapter 7, you can still protect equity in assets, but not to the extent you can with Chapter 13. You can shield $3k in equity in an auto and up to $35k in home equity in individual bankruptcy and $70k in a joint bankruptcy.
If you qualify for Chapter 7 bankruptcy but have excess equity in a car, that can be remedied by a quick sale. For instance, if your car is worth $10k, but you owe $6k, that means you have $4k in equity, and it’s $1k more than you can protect. In this case, you could sell the care for $10k, pay off your loan, use $3k of the profit to buy a used car and then use the other $1k for standard expenses like your rent/mortgage, utilities, auto insurance, etc.
What you can’t do with the other $1k is pay off a specific creditor. Choosing one creditor over another is considered a “preferential payment” and is not allowed under bankruptcy law. If you pay that creditor, then the court can go back and reclaim the money from the creditor and allocate it as they see fit. Often, consumers might try this if they owe money to a friend or relative. A personal loan like that is still considered debt under the bankruptcy and must be treated like all other debt.
Be Transparent and Ask for Advice
One of the best things to do when considering Wilmington bankruptcy is to meet and talk with a bankruptcy lawyer during the decision-making process. Most people don’t understand the ins and outs of bankruptcy, the benefits of one chapter versus another, and the critical timelines for filing. For instance, you may qualify for Chapter 7 protection this month, but not next if your earnings fluctuate or you just got a big raise or promotion.
Schedule a consultation with a reputable local bankruptcy attorney – this should be at no cost and with no obligation and discuss your debt, income, and assets. Tell them your goals and find out your options and their advice for the best approach for you. From there, it’s up to you what you do, but at least you have the information you need to make an informed decision about your financial future.
To find out more, contact the Law Offices of John T. Orcutt. Call +1-888-234-4190 now for a free Wilmington bankruptcy consultation at one of our convenient locations in Raleigh, Durham, Fayetteville, Wilson, Greensboro, Garner or Wilmington.