Selling Personal Property to Family Before Bankruptcy

: Chris Lee Law Firm

  Filed under: Debt

selling to familyDallas Bankruptcy Lawyers regularly face questions for guidance around selling personal property to a family before bankruptcy. Many times, individuals want to sell some of their property such as an automobile or other personal effects to pay for their bankruptcy attorney or bankruptcy fees. While you are allowed to sell property to a family member before bankruptcy, there are a few guidelines and rules that you should follow to avoid negative repercussion such as the dismissal of your bankruptcy case or being charged with bankruptcy fraud.

Selling Nonexempt Property Before bankruptcy

Even if you aren’t able to protect property under Texas or Federal exemptions during bankruptcy, you can sell it as long as the transaction meets specific requirements:

  • You needed the money for daily necessities such asĀ mortgage payment, food, gas, or utilities
  • You sell the property at fair market value
  • Keep excellent records of the transaction

As long as your transaction can show that you needed the money and spent it on necessities, you will avoid any issues with the bankruptcy. If you need money for any other purpose, it is highly advised you contact your bankruptcy attorney before selling the property to ensure you stay on the right side of the law.

Selling Property Before Chapter 7 bankruptcy

With a Chapter 7 bankruptcy, you declare your exempt property, and the bankruptcy trustee will then sell all nonexempt property you own to satisfy debts you owe to creditors equally. Because of this, there is no reason to take up the task of selling this property as the bankruptcy trustee will do this.

Avoiding Bankruptcy Fraud

While bankruptcy is a fantastic tool used to free consumers from massive debt, it does come at a cost to creditors. These costs are mitigated by ensuring that an individual filing for bankruptcy lists all their assets and any property transferred that occurred during bankruptcy. Thus hiding any previous transactions in the past three to five years before bankruptcy comes with enormous risks, with serving jail time and paying restitution being the most severe.

Call a Bankruptcy Attorney First

Because of the standing implications of selling any property to a family member during bankruptcy, it’s imperative to first contact your Texas bankruptcy attorney before doing so. A Dallas bankruptcy lawyer will help you understand whether the property is exempt or nonexempt, the importance of transparency in your pre-bankruptcy transactions, and how to ensure that the Texas Bankruptcy Courts do not take back the property or accuse you of bankruptcy fraud.


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