Certain types of activities that you do prior to filing can render you ineligible to file bankruptcy for a period of time.  If you sell or gift any type of property the 2 years before filing for bankruptcy, it is very heavily scrutinized in bankruptcy.  The reason these transfers are so scrutinized is due the amount of people who have attempted to cheat the bankruptcy system in the past.  Essentially, the issue with transferring property that arose (and is still an issue) was that many people are tempted to “gift” a large asset to a friend immediately before filing to avoid it from being taken by the trustee through the bankruptcy to sell it for the benefit of the creditors.   These transactions usually take the form of a person selling a house or a car for a very small amount, such as $5.00, knowing that once the bankruptcy is over,  the family member or friend will simply give the property back.  Any transfer or sale of property for substantially less than what the property is worth are often considered fraudulent by the bankruptcy court, and can lead to the dismissal of your case.  Even if you transferred the property in good faith, perhaps at a time when finances were in order, the trustee can still order that the person to whom you transferred the property give it back to sell to benefit creditors.  While this may seem unfair, it is still something that the trustee has the power to do, as set forth by the bankruptcy code.

After meeting with an attorney and finding out about this portion of the bankruptcy code, you may be tempted to undo the transfer by taking the property back; however, the trustee can see title transfers by a simple, routine check.  If the trustee sees that you are trying to right this wrong, they can still assume that you are being deceitful.  If you have transferred property in the 2 years leading up to filing, it is a good option to wait until the full 2 year period is up before you file a case.   This way, if you are asking if you have transferred property in the past two years (which is required by the “statement of financial affairs”), you can honestly answer “No”.  If you decide that you do not want to wait to file until the 2 year period is up, it is essential that you discuss with your attorney the consequences of this decision.

If you have questions about property that you have transferred and how it could affect your bankruptcy, please contact a St. Louis Bankruptcy Attorney today!