If your financial situation warrants bankruptcy, you may be considering moving assets to protect them. However, your Los Angeles bankruptcy attorney may suggest otherwise. Filing for bankruptcy is complicated. It is designed to protect you as well as your creditors. As such, there are certain assets you don’t want to transfer, as doing so may be construed as fraud and appear you’re trying to get out owing a lender.
Some of the most important bankruptcy tips include avoiding:
- Putting bank accounts/property assets in the name of others: You may have good intentions by placing your personal bank account or real estate in a family member’s or friend’s name. But creditors may seek to seize these assets if you file for bankruptcy. They can challenge such an asset transfer or demand you return the assets to the bankruptcy estate. If you have sold something valuable and can’t get it back, it’s best to hold off on filing until a later date.
- Submitting an overpayment, or prepaying, creditors: Other creditors or bankruptcy trustees may see this as trying to avoid payouts to them. Your intent may be to repay family in friends in advance, but the trustee can end up voiding the payments. It could also look to them as preferential treatment. The only exception is mortgage payments that must be made to avoid being displaced. Otherwise, speak with your Orange County bankruptcy attorney before paying large amounts.
- Placing remaining funds into a retirement account: A bankruptcy trusty may see this as an attempt to avoid paying creditors, so it is a major red flag. Regular payments to a standard retirement account won’t hurt your credibility. Unexpected large payments may be voided if you file for bankruptcy. It’s therefore important to keep track of your monthly retirement account contributions before, during, and after filing.
There are considerations if an asset is transferred. In 1986, the U.S. Ninth Circuit Court of Appeals held that a fraudulently transferred asset is one that must have remained transferred at the date of a bankruptcy filing. That means you could recover a transferred asset and not face penalties. Before filing, it’s essential to:
- Have the title of the asset signed back to you.
- Create a new document that proves the transfer.
- Make clear your intent not to engage in a fraudulent transfer.
- Keep a record of your assets.
However, assets can be transferred, so you can sell something if necessary. It must be at fair market value or in exchange for something at a reasonably equivalent value. But never guess as to whether one asset counts or not. What seems like a simple transaction can turn into a big mistake that will cost you later.
Your best path to bankruptcy and managing your assets properly is to consult with a Los Angeles bankruptcy attorney at OakTree Law. Our attorneys can help you with every step of the process. Request a free consultation online or call 562-219-2979 today for assistance.