The Dangers of Transferring Property Prior to Filing a Bankruptcy

Are you considering filing for Chapter 7 bankruptcy in the Tampa Bay area, it is important to understand the dangers of transferring property prior to filing. Given that you are planning to file for liquidation bankruptcy, you are likely aware that you will only be permitted to retain property that is exempt. In other words, under Florida statutory law, you will be allowed to keep only a specific amount of property, and the rest will be liquidated in order to repay your creditors and to discharge your debts. For instance, individuals filing for personal bankruptcy can exempt up to $1,000 of personal property, which can include items like furniture, electronics, or art. There is an additional motor vehicle exemption that allows a debtor in Florida to exempt up to $1,000 in motor vehicle equity. More exemptions exist, but these are just a couple of examples.

Now, what happens if a debtor decides to give a transfer a piece of property (by giving it as a gift, for example) to a family member to avoid liquidation? In short, if you transfer property and do not disclose it, this can be a serious problem, possibly resulting in you losing your ability to file for bankruptcy and even potential federal  bankruptcy criminal charges.

Bankruptcy Rules Regarding Property Transfers

Imagine that you have a desk that you consider to be a family heirloom, and it is valued at $25,000. You do not want to sell the desk to pay off your debts (which total more than $100,000) to avoid bankruptcy, and you also want to avoid having the bankruptcy trustee sell the desk as part of the liquidation process. In order to keep the desk in the family, you give it to your sister, who has been asking to have the desk for a number of years anyway.

Now it is time to fill out a Statement of Financial Affairs for Individuals (B 107 Form) in which you provide information about your financial affairs, including your assets and any recently transferred assets. For individuals filing for bankruptcy, you must provide information about any assets that were transferred recently. The “look back” period can vary depending upon the type of property and how it was transferred. If you do report that you gave the desk to your sister (along with any other assets that you might have transferred before filing for bankruptcy), those transfers typically will not affect your ability to move forward with your bankruptcy, but the trustee may be able to recover those assets and liquidate them.

Alternately, what happens if you do not list the desk and any other items you transferred? You might innocently leave an item like the desk off the list, not recognizing that you need to disclose its transfer. However, if you fail to disclose the transfer of any nonexempt property, you can face serious consequences.

Consequences of Failing to Disclose Property Transfers

First, and most immediately, if you fail to disclose a property transfer, you likely will not be permitted to move forward with your bankruptcy petition. This is not the only consequence, however. To be sure, if you knowingly leave it off the list with the intent to prevent the asset from being liquidated, you can face criminal consequences and fines.

Under federal law (18 U.S.C. 152), the concealment of property in a bankruptcy proceeding can result in criminal charges. Debtors who accidentally fail to disclose cannot be found guilty. Rather, the debtor must “knowingly” and “fraudulently” conceal the property or assets in order to face criminal consequences.

You should know that these cases occur somewhat frequently, and prosecutors do move forward with them. To be sure, a recent article in the Tampa Bay Times cites a number of bankruptcy cases in Florida in which debtors concealed assets and faced severe consequences. Sentences can vary depending upon the nature and circumstances of the debtor’s offense, the debtor’s own history, and a number of other factors, but it is important to keep in mind that a sentence certainly can include a term of imprisonment.

Contact a Tampa Bankruptcy Lawyer

It is important to ensure that all paperwork in your bankruptcy case is truthful and honest. An experienced bankruptcy attorney in Tampa can help you to get your case in order. Contact Samantha L. Dammer today to learn more about how we can assist you.

Resources:

leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&URL=0200-0299/0222/0222ContentsIndex.html

tampabay.com/news/in-bankruptcy-debtors-hide-assets-and-pay-the-price/1151779