10 Mar 7 Letters That Spell Bankruptcy Trouble
Should be simple, you think.
Don’t be fooled. This word is complex and dangerous if you don’t understand what it means in the bankruptcy context.
The bankruptcy papers include a series of questions about recent financial history called the Statement of Financial Affairs.
One question asks about transfers you’ve made outside the ordinary course in the past two years.
But consider the Bankruptcy Code’s definition of transfer:
(54)The term â€œtransferâ€ meansâ€”
(A)the creation of a lien;
(B)the retention of title as a security interest;
(C)the foreclosure of a debtorâ€™s equity of redemption; or
(D)each mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing of or parting withâ€”
(ii)an interest in property.
Take another look at subsection D: each mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing or parting with an interest in property.
Getting this right, and complete, is important for a couple of reasons.
Some of these transfers may be avoidable by the trustee. If you signed your car over to your brother, the trustee may sue your brother to get it back. And when he gets it back, it belongs to the bankruptcy estate and your creditors, not you or your brother. Ouch!
If your bank account was levied, perhaps you can get the money back. But there’s a general principal in bankruptcy law that you can’t benefit from any asset that you didn’t list in your paperwork. Fail to see that levy as a transfer, and you may lose the right to recover the money.
Transfers: let me count the ways
Here’s a list of events that are transfers in the bankruptcy context:
- Creating a lien to secure a debt
- Changing the way title is held
- Settling a dispute and giving up legal rights
- Trading in a car
- Giving used stuff to Goodwill
- Selling a house, car, or stock
- Experiencing a levy, garnishment, or judicial sale
The list isn’t complete. But it should get you started thinking about ways in which your property rights and your legal rights may have changed in the past two years.
Essential for bankruptcy planning
Many of these transfers, while important for disclosure, will have no impact on your life or the lives of those around you, in your bankruptcy. Others may invite the trustee to sue the transferee.
Worse, intentional or reckless failure to disclose could result in your not getting a discharge in bankruptcy.
Take some time, in preparing your bankruptcy papers, to find the transfers in your financial life and discuss them with your lawyer.
The failure to understand and disclose transfers is one of the most frequent, and most destructive, mistakes that people filing bankruptcy without a lawyer make.
and personal finance.
Image courtesy of Flickr and Gregoirevbd.
Cathy Moran, Esq.
Latest posts by Cathy Moran, Esq. (see all)
- Can You Afford The Cost Of Waiting? - November 10, 2013
- Lost IQ: The True Cost Of Just Paying The Credit Card Minimum - October 10, 2013
- Getting Rid Of Tax Liens After Bankruptcy - September 10, 2013
- Why The Information You Give Your Bankruptcy Lawyer Has A Sell-By Date - August 27, 2013
- Super Heroes Fight Debt - August 10, 2013