Is it Okay to Sell Assets Before Bankruptcy?

: Chris Lee Law Firm

  Filed under: Bankruptcy

Selling Assets

When you file Chapter 7 bankruptcy, your assets will be evaluated and your trustee could sell any nonexempt property. Any money obtained by selling your property will be distributed to your creditors to satisfy the debt. If you have sold any nonexempt property within the prior two years before submitting your bankruptcy papers, the court could dismiss the sale. Some states could go back six years if you sold, transferred, or traded property.

If the court determines that you sold the assets to hide them or prevent them from being seized, the sale can be voided, and you may be held liable. The trustee will try to determine if there is any fraud in your case.

Exempt Property

Many of your assets may be exempt from seizure. State and Federal bankruptcy laws are very generous with what you will be able to keep during bankruptcy. You may choose one or the other, but not both. Your bankruptcy attorney will help you determine what exemptions will be best for your specific situation.


If you purposely hid any assets to prevent your creditors from benefiting from the sale, this is considered ‘fraud’. If you sold your assets for less than fair market value, this is ‘constructive fraud’. To prevent being charged with fraud, avoid making any sales or transfers before filing bankruptcy. If you sold assets to purchase necessities, be sure to explain this thoroughly to your trustee. Provide paperwork if possible.

Chapter 13

If you have sold assets in the last couple of years, and worry you could be charged with fraud, you may want to file Chapter 13 bankruptcy instead. Your assets are not sold in Chapter 13; alternatively, you keep all of your property and follow a court-approved repayment plan for your past-due debt. When you finish your plan, any remaining qualifying debt will be eliminated.

Speaking with a Fort Worth bankruptcy attorney can help you decide what type of bankruptcy to file and how to explain any recent sales. Call today to find out how you can achieve financial relief.

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