Rules About Property Transfer In A Bankruptcy
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Many people worry, understandably, about losing their property during a bankruptcy proceeding. Some people believe that they should transfer personal property, such as a house or car to family member or perhaps even a friend to protect it from creditors. Also, many people are unsure if they should repay a loan or debt to a friend or family member prior to filing for bankruptcy.
While wanting to preserve as much of your personal property is quite understandable, transferring property to protect it from your creditors will not work. Your bankruptcy trustee, also known as the court-appointed person who is in charge of your case, can void these types of transfers, so the property will likely have to be returned. This is especially true if the property is not transferred at an equivalent value. For example, if you sell your car to your brother for $5, this would be considered fraudulent, whether you meant it to be or not.
In addition, you might have received a helpful loan from a sibling, parent or friend to help you through your difficult financial time. While you might really want to pay them back prior to filing to ensure that they are paid, this usually is considered preferential treatment by the court and is not allowed. Again, the trustee can void this payment. Keep in mind that while you might not have to pay them in full during bankruptcy proceedings, you can voluntarily pay back the remainder of the loan after the process is over.
Even though you are in debt and are worried about losing property, some types of property can be preserved during a bankruptcy. Each state has its own exemptions in place to allow debtors to keep a set amount or type of property. So rather than transferring a home to a friend, for example, which will likely be voided by your trustee, take the homestead exemption instead, and this will protect your home. Here are just a few examples of exemptions and how they work.
Homes: In Arizona, you are allowed a $150,000 homestead exemption. Therefore, if you have $150,000 in equity in your home or less, you probably will be able to keep it. If your equity is larger than $150,000, the trustee can sell the home, but you will still have $150,000 from the sale to use for housing.
Motor Vehicles: There is a $5,000 exemption. If you car is paid for and worth less than $5000, you can keep you car. If it is worth more than $5,000, then it might be sold. Still, you will be able to keep $5,000 as per this exemption.
Food, Fuel & Provisions for 6 months: 100% of this is allowed.
There are more exemption laws, which vary by state, so be sure to find out what exemptions are available to you. Consulting an attorney, however, is truly the best way to protect your property from creditors.
Article Source: Articlelogy.com
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