Be wary of asset transfers before bankruptcy
Image Source: Flickr User Jake Rustenhoven
When you’re considering filing Greensboro bankruptcy, you have to be careful about doing anything with your available cash and assets. If you try and pay off a debt to a certain creditor before filing, that can be considered a “preferential payment” because you’re showing a preference to one creditor over another. When it comes to transferring assets, you can be accused of a “fraudulent transfer.” Here’s what to know before you file Greensboro bankruptcy, so you don’t wind up in trouble.
Fraudulent Transfers: Look Back Period Is Two Years
The Trustee assigned to your Greensboro bankruptcy case can look back at your property and asset transfers for up to two years before the date of your bankruptcy petition. A fraudulent transfer can some when you sell, give away, or donate an asset. This can include cash, property, or anything of value. If the Trustee files an objection to a transfer and recovers it, they can sell it and use the proceeds to pay some of the debt in your bankruptcy case. This is a situation to avoid, so knowledge is key.
Fraudulent Transfers: Intentions Matter
Because the look back period is so long, you might have unintentionally made a property transfer that the Trustee on your Greensboro bankruptcy case could consider fraudulent. What might have seemed like an innocent activity can be deemed a fraudulent transfer and the Trustee may retroactively undo it. The spirit of a fraudulent transfer is that it was an action intended by you to avoid paying a creditor. This usually happens when an asset is sold at a low price or transferred for free.
Fraudulent Transfers: When You Can Sell or Give Away
There are certain conditions that must be met when it comes to disposal of property to be considered a fraudulent transfer in your Greensboro. Consider an asset such as a jet ski that you decide you don’t need and this is a year before you file bankruptcy. You sell the jet ski for a fair price and use the money to pay bills and so the transfer wasn’t “fraudulent” according to the law. Another instance is that a year and a half before you file, if you’re financially solvent, you can give away the jet ski to a friend and it’s okay.
Fraudulent Transfers: Intent and Financial Status Matter
The first criteria to overcome to make sure your property transfer will be tolerable to your Greensboro bankruptcy Trustee is your financial solvency. If you’re financially solvent at the time of the transfer, it follows that you’re likely not considering bankruptcy. The second condition is equivalent value. If you get less than fair market value for an asset, you must have been solvent at the time or it can be considered a fraudulent transfer if it occurs within two years of filing Greensboro bankruptcy.
Fraudulent Transfers: Charitable Contributions May Be Exempt
One type of transfer that might be okay with your Greensboro bankruptcy Trustee is qualified charitable contributions. The donation of cash or assets must be to a qualified charitable or religious organization under 501(c)(3). Other conditions are that the donation can’t exceed 15% of your income in the year it was made. Finally, perhaps the most important consideration, is whether the donation was in line with your charitable giving habits. If not, it might be considered fraudulent.
Tell Your Lawyer About Recent Property Transfers
To make sure you’re in compliance with federal bankruptcy laws, be sure to give information about any asset transfers you’ve made in the past two years when you go in for your Greensboro bankruptcy consultation. To get good results and act within the law, you should always be completely transparent with your attorney. That way your attorney can give you the best advice.
To find out more about the benefits of Greensboro bankruptcy, contact the Law Offices of John T. Orcutt. Call +1-919-646-2654 now for a free bankruptcy consultation at one of our locations in Raleigh, Durham, Fayetteville, Wilson, Greensboro, Garner or Wilmington.