It is not uncommon for individuals experiencing financial difficulties to get concerned about assets they own. A creditor, once they have sued you and obtained a judgment, can often seize assets to pay towards debts they have outstanding. Some debtors in hopes of avoiding this potential loss might transfer assets to a trusted relative or sell items for less than fair market value.
The debtor that has made these types of transfers could run into grave issues in the context of filing a bankruptcy. The bankruptcy laws allow the trustee assigned to the debtor’s case to undo transactions where fair market value has not been realized. This could result in the trustee suing the individual you transferred the asset to. The trustee can sue for the difference between the market value and the amount paid for the asset. If the asset was transferred for no money or well below market value, it could create considerable problems for the recipient of the transfer. The trustee is able to look back for up to 2 years for these types of transactions under the Federal bankruptcy code and up to 6 years for these types of transactions under applicable Michigan law.
It is important that if you are considering bankruptcy that you speak with an attorney before transferring any of your assets. While it is always a problem to sell an asset to a relative, you’ll want to follow proper procedures to make sure the transaction doesn’t complicate your bankruptcy.
At the law offices of Andersen, Ellis & Shephard, we have represented thousands of individuals in consumer bankruptcy filings.