Transferring or Selling Assets before Bankruptcy
There are plenty of ways someone dealing with financial problems can make money and yard sales and rummages are one of the most popular. After all, what better way to earn some cash than to sell items around your home you no longer want or need?
But is this something you can do if you are considering bankruptcy?
It might surprise you to learn that having a yard sale too close to filing for bankruptcy or shortly after you’ve filed could affect your case, but probably not to the extent that many people believe. The warning not to sell anything or earn extra money because the trustee could undo the transaction is certainly valid, but you probably don’t need to worry about the trustee tracking down a neighbor to whom you sold your old, rarely used Vitamix or dusty treadmill.
What do you need to know about yard sales and other personal sales of your belongings to avoid a problem as you prepare for bankruptcy?
Watch Your Prices
The main concern of the bankruptcy court is that you will off-load assets for less than they are worth in an effort to “protect” them. So, for instance, if you sell your boat to your cousin for $15, it could raise a few eyebrows.
It isn’t the sale of the item that’s the problem it’s the price you sold it for that seems suspicious.
Anything you sell must be for a reasonable value because otherwise, it can also seem as if you are trying to short your creditors. This means no gifts and no bargain sales to avoid giving the money to the people who are pursuing legal action against you.
Even if you have the best intention – let’s sell everything I own for a fraction of what it’s worth to drum up some quick cash to deal with debt – it can look questionable to the court. If you choose to hold a yard sale, price everything reasonably and keep a record of all of the transactions that occur.
What to Know about Fraudulent Transfer
Chances are if you’re filing for bankruptcy you’ll hear the term “fraudulent transfer.”
When you file for bankruptcy, the trustee gains the power to recover assets and money from any fraudulent transfer that occurred within two years of filing.
And even though there’s a good chance the trustee and your creditors won’t bother with undoing the transfer because it just wastes too many of your resources, it is quite likely that your bankruptcy discharge could be denied. You could lose all of the benefits of filing for bankruptcy if any transfer you make is thought to be fraudulent.
If you’d like to learn more about fraudulent transfers, check out this information from NOLO.com.
Why Value is Important
So how do you avoid being accused of fraudulent transfer if you want to dispose of any assets before filing for bankruptcy?
Make sure you get reasonable equivalent value in return for any item you sell. This doesn’t mean you need to get what you paid for it, but you need to get what the item is worth in today’s market. As long as you get what the market says it is worth, even if that is significantly less than what you paid, you should be okay.
Also, be clear about the assets when you file for bankruptcy. Keep careful records of what you did to sell it and the details of the transaction and disclose this information in your bankruptcy schedule. An experienced bankruptcy attorney can help you with this process as long as you disclose to them the information about the sale.
To learn more or to find out if your upcoming yard sale could put your bankruptcy in jeopardy, contact the bankruptcy Law Office of Robert M. Geller at 813-254-5696.
or schedule an appointment with a bankruptcy attorney online today