When people are considering bankruptcy, they may not inadvertently pursue a number of actions before filing that can cause major legal headaches later on. One such action is transferring or selling property to family members or friends at a bargain price right before filing one’s petition with the bankruptcy court of their jurisdiction.  While a person may have no ulterior motive other than to happily gift something to someone else, this may lead to a number of consequences, including disqualification from filing for bankruptcy. 

For example, when a child needs a car but cannot qualify for a loan due to age, his or her parents may end up buying the car on their behalf.  Even though everyone understands it is the child’s car, a bankruptcy action may result in the car ultimately being taken by creditors.  Despite how unfair it may be to take away the child’s car just because it is titled in his or her parents’ names, the U.S. Bankruptcy Code is clear as to what you should and shouldn’t do regarding the transfer of property.

Specifically, when people file for bankruptcy, one of the questions that a debtor is asked by the court is about all of their property, gifts and the like that they transferred to others in the period prior to filing a bankruptcy petition.  A debtor cannot omit or conceal any transfers, even though they feel their actions were honest and justified.  Any failure to answer questions truthfully and accurately could be treated as fraudulent or even perjury, in some cases.

Additionally, when there is a transfer of title or sale for less than full money’s worth (as with a gift to a child), the trustee in bankruptcy has the power to compel the recipients to return the property to the debtor.  In most cases, that often ends up being much worse than if the debtors had never made the bargain sale in the first place.  There is a significant amount of time and effort involved in returning the property or paying its full value, and in many cases it is unexpected and causes a financial hardship to others, in addition to the debtors in bankruptcy.  In other words, a person’s child may lose his or her means of transportation to work or to school.  Additionally, there may be additionally imposed penalties and legal consequences should a person fail to obtain proper counsel before taking actions that could ultimately cost them their financial freedom.

Call My Office Now for a Free Confidential Consultation

Don’t let the above scenarios happen to you. Speaking with a bankruptcy attorney right away to find out about your legal rights, responsibilities and options. Instead of waiting for your debt situation to worsen, call us now at 913-742-8700 for a free initial consultation.  We will examine your finances and help you determine the most favorable course of action necessary to address your debt.