When you are already experiencing financial hardships, the decision to file bankruptcy is not always an easy one. Many people feel there are stigmas involved with filing bankruptcy or fear losing all of their property. In bankruptcy, the creditor maintains the right to seize and liquidate the assets of the debtor in order to satisfy the debt. However, many states offer exemptions, which provide protection of some of your assets from liquidation by creditors. Hiding or lying about your assets during bankruptcy can be a big problem. Unfortunately, there have been cases where an individual gave their assets to friends or family members in efforts to protect those assets during bankruptcy. Transferring your assets to others before filing for bankruptcy can bring serious problems.
Transferring assets to others, selling assets or removing your name from the title of assets prior to filing for bankruptcy is not acceptable. Abusing these protections can cause you to lose all of your non-exempt assets to liquidation by the creditors. In bankruptcy, the court appoints a trustee to manage your assets and debts on your behalf. If the trustee determines that any of your actions are fraudulent, you risk having your case dismissed and the possibility facing legal action. Transferring assets to a family member or friend leaves them open to legal action as well. The trustee can sue the family member or friend in order to obtain the asset. Once the trustee has obtained possession, your assets are no longer under the protection afforded by bankruptcy laws and they will give the asset to the creditor for liquidation. It is also not acceptable to give away your personal property prior to bankruptcy. You are allowed to sell personal property as long as you receive fair market value for the assets and claim the money received as an asset in the bankruptcy petition. Another cause for concern is removing your name from the title of any property. Not only can this be considered fraudulent in the bankruptcy process, the title company may also consider it fraud and they also have the right to sue you.
Bankruptcy laws intend to help the individual by eliminating their debts and protecting their credit standing. Bankruptcy exemptions, provided by each state, are designed to help the consumer keep the majority of their assets throughout the process. The protections afforded under bankruptcy laws are not a right, but an allowance. If you are considering filing for bankruptcy, seek counsel from a qualified bankruptcy attorney to help you determine how the bankruptcy process can help you return to financial stability.