Arizona Bankruptcy Attorney: Beware of Transferring Property Before Bankruptcy

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On a pretty regular basis I have clients ask me if they can “sell” their car to their brother or simply give away an asset to a friend prior to filing for bankruptcy. The thought process is pretty straight forward – “in bankruptcy I will lose this asset, if I give it away, I technically won’t have it and thus the bankruptcy court will not be able to take it from me.” This is usually followed up with the thought that the friend can then “sell” or give it back to the person once their bankruptcy case is over.

Any type of transfer prior to bankruptcy is risky, and the above examples can be considered fraudulent. One thing to remember is that while this is likely your first time in bankruptcy, this isn’t the bankruptcy court nor the US Trustee’s Office’s first rodeo. Any way you may think of to conceal assets has been tried and failed thousands of times. Worse, it is felony to conceal assets in a bankruptcy and it carries heavy penalties and prison time – and yes people do go to prison for committing bankruptcy fraud.

If a person does transfer an asset prior to filing bankruptcy under certain situations the Trustee assigned to your bankruptcy case can go and get that asset from whomever you transferred it to. The bankruptcy code allows this under sections 547 and 548.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© John Skiba, Arizona Consumer Law Group, PLC | Attorney Advertising

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