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A Guide To Property Sales & Transfers

One who is considering bankruptcy is likely already struggling to make ends meet; however, many prospective filers are cautious about selling any of their property to pay their regular ongoing expenses such as rent and utilities. After all, it is unreasonable to endanger one’s opportunity for a discharge of their debts just to make a little bit of side cash. However, selling your property does not have to be risky business. The court will be okay with these so long as you are not attempting to make a fraudulent transfer. A fraudulent transfer is a transfer where one disposes of an asset for less than its fair market value. An example of such a fraudulent transfer would be selling a vehicle or parcel of land to a friend or relative for a nominal amount, such as for a single dollar.

In order to file for bankruptcy, one must disclose in the bankruptcy paperwork the transfer of any personal and real property for 2 years prior to filing the bankruptcy case. Bankruptcy trustees in California will often also ask about transfers of real estate for the 4 years prior to filing bankruptcy due to the 4-year statute of limitations under California’s Fraudulent Transfers Act. If a transfer is found to be fraudulent, the bankruptcy trustee is permitted to recover any assets or money transferred in order to use these items to pay creditors, thereby depriving both parties of the benefit of the transfer. Significant fraudulent transfers can result in the outright denial a discharge through bankruptcy.

Before you sell anything, you should bear several things in mind:

First, you should research the item’s Fair Market Value. The fair market value is only worth what a buyer will give you for a particular item, on this day, in the present market. Some items will depreciate quickly, thereby decreasing their fair market value,

Second, you should document your research and concerning an items’ Fair Market Value along with your efforts to sell the asset(s). Saving this research and documentation for later will make it much easier to argue that at the time of the sale you received fair market value in exchange for the asset.

Third, you will need to disclose in the Statement of Financial Affairs the a) recipient of the transferred asset, b) what you received in exchange, c) the date of the transfer.

Last, if an item does not have any market value, you may donate it or junk it. However, be sure to document any charitable donations made in this manner for up to 1 year prior to filing your bankruptcy case. These donations will also be disclosed in the Statement of Financial Affairs along with any property transfers.

For more information concerning completing proper asset transfers before filing for bankruptcy, please feel free to contact your Yuba City bankruptcy attorney at 530-797-4402.

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