Transferring around your assets before you file a bankruptcy is generally a bad idea and is always highly discouraged by any competent lawyer. Such a transfer of an asset could potentially be unwound by the trustee or your creditors if it was made solely in order to hinder, delay or defraud your creditors' collection efforts.
Transfer of Assets Before Filing Bankruptcy in San Diego
When you have creditors on the horizon and you transfer an asset to someone without receiving reasonably equivalent value in exchange for the transfer, the transfer can be deemed “fraudulent” as a matter of law as to your creditors. This is different from what you would typically think of as fraud, which occurs if you misrepresent a fact to someone and they detrimentally rely on your misrepresentation and suffer financial harm as a result. A fraudulent transfer, in the strict legal sense, is fraudulent without receiving fair value in return for the transfer.
Let's say, for example, that you have a car worth $25,000 and you own it free and clear without a car loan. If prior to bankruptcy you transfer title to your friend without receiving any money, then the San Diego bankruptcy trustee could file an action to have the transfer deemed fraudulent as to your creditors. Had you not transferred the car to your friend, it would be an asset that your creditors could use to satisfy part or all of the debt that you owe them. By transferring the car to your friend, you deprived your creditor of the ability to satisfy its claim from that asset. This makes the transfer legally fraudulent as to your creditor. Had you received $25,000 in exchange for the transfer, then you would have $25,000, or whatever remained of it, in your bank account and your creditors could satisfy part or all of their claim from the money in your account.
In the example above, even if you received $15,000 in exchange for the transfer, the transfer could still be deemed fraudulent because the amount paid was $10,000 short of the fair market value of the car. The idea is that you did not receive the fair value for the assets. You received $10,000 short of the fair value, and, as a result, you have $10,000 less in your account. That is $10,000 less money that your creditors could have used to satisfy their claims.
Transferring assets can become a critical issue for you and your lawyer during the bankruptcy planning process. When you file bankruptcy in San Diego, you can only keep a certain amount of assets, which is determined by your applicable bankruptcy exemptions. If your assets exceed the amount you are allowed to keep under your applicable bankruptcy exemptions, then you may need to do some transferring of assets or else risk having the bankruptcy trustee liquidate and sell some of your assets. There are legal ways to transfer assets (to a certain extent) in order to protect them from your creditors and without the transfer being deemed a fraudulent transfer. Legal transferring of assets, often a critical part of the pre-bankruptcy planning phase and an experienced lawyer will be well versed in.
So in conclusion, you can transfer assets before you file bankruptcy San Diego, you just better make sure it’s done properly, after discussion with an experienced San Diego bankruptcy attorney, so that it is not deemed a fraudulent transfer that can be set aside by the trustee or by your creditors. All of the laws regulating assets transfers before bankruptcy must be considered. Otherwise, you may be in for a big shock when the San Diego bankruptcy trustee recovers your transferred assets and starts selling them to pay off your creditors.