In Chapter 7 bankruptcy, the nonexempt assets are sold, and the proceeds go to pay your creditors. Both federal and state laws allow the court to void an asset sale that was made just prior to filing for bankruptcy. If the court determines that the assets were sold or transferred to avoid having them be included in the liquidation process, you may be held liable.
When you file for bankruptcy, the court-appointed trustee will ask the debtor if they have traded, sold or transferred property within the last two years. Some states can go back as far as six years. The trustee is looking for fraud concerning your bankruptcy.
Types of Fraud
Actual fraud; where the debtor intended to delay, hinder or defraud a creditor.
Constructive fraud; when the debtor received less than fair market value during the time the debtor was insolvent.
Talking to your Citrus Heights bankruptcy attorney can help you evaluate whether you are at risk of penalties involved in what the court considers an improper sale of your assets. Much of your assets may be exempt and will not be included in the bankruptcy process. To be safe, don't make any transfers shortly before filing.
Don't Leave Anything Out
Be honest with your attorney and explain any past and recent sales or transfers. Looking at your case, filing a Chapter 13 bankruptcy instead of Chapter 7 may be in your best interest if you have such transfers to declare. The trustee does not liquidate your assets in a Chapter 13 bankruptcy, but instead, you must follow a court-approved repayment plan on your past due debt. When you have finished making your payments, some remaining past due debts can be eliminated.
The issue can become complicated, especially if you sold items to be able to make other more relevant payments. A Citrus Heights bankruptcy attorney will have the experience you need to help minimize any problems that may arise during your bankruptcy.