Today, we move down our alphabet list to F for Fraudulent Transfers.
Do you cut your own hair? Or fix your own brakes? How about self-diagnose and treat an illness? I only tried cutting my own hair once when I was 13. As you might imagine, it was a complete disaster. I cut my bangs to about 1 inch, and let’s face it - no amount of professional intervention can cure that. Now, I know. When it’s important, get professional help before endeavoring in self-help.
One of the biggest mistakes a person makes when s/he starts going into deep debt is attempting to hide assets by transferring or selling it for less than fair market value to friends or family. Transfer of assets with the intent to hinder, delay, or defraud is known as a “fraudulent transfer.” An example might be selling your car for $1 to your mom so that the creditors can’t take it or quitclaiming title to your home to someone you trust. Oftentimes, such a strategy is misguided, unnecessary and causes more problems than solving it. Remember, filing for bankruptcy does not mean you’ll lose all of your assets!
In bankruptcy, we are required to disclose transfers made within certain “look back” periods. So, in our example above, the sale for $1 will have to be disclosed. The trustee in the bankruptcy case can unwind or “undo” the transfer and get the car back then sell it for the benefit of repaying the creditors. Worse yet, fraudulent transfers can be the basis of denying discharge. What this means is that not only will you lose the car, but you can be still stuck with all of your debts!
I see clients making serious mistakes by exercising “self-help” which can be very costly to fix and like a bad haircut, no amount of professional intervention may be able to fix the screw-up. So, remember to ask your lawyer first before transferring property.
Other F’s from Bankruptcy Attorneys
Failure
Family Farmer/Fisherman
Financial Fatigue
First
Foreclosure
Foreclosure
Forgiveness of Debt
Forms
Fraud
Fraudulent Transfer
Future Flow Agreement
Image Credit: Leo Reynolds