So, you’re thinking about filing bankruptcy. You visited an Arizona bankruptcy lawyer for your free consultation, and she told you that you will have to surrender your pair of $2,000 diamond earrings to the bankruptcy trustee after you file. So, you simply say you are going to sell them to your sister for $100 before filing.
Or you have an extra car that is not exempt. You really bought it for your son to use for college, but title is in your name. You decide to simply transfer the title into your son’s name so you don’t have to surrender the car to the bankruptcy trustee after you file bankruptcy.
You’ve just caused big problems, not only for your own bankruptcy but for the people you gave your property to.
If you transfer property within 2 years (and maybe even 4 years if the trustee utilizes a specific Arizona law) prior to filing bankruptcy, either to defraud creditors or by selling it on the cheap, you have engaged in an unlawful transfer. The trustee can go after the person you transferred the property to and get the property back. And if the transferee refuses to surrender it, the trustee will file an action against that person, get a judgment, and collect against that person just like any other lawsuit. Worse yet, the trustee could also file a non-dischargeability action against the debtor to deny the discharge if the debtor acted egregiously.
Take the recent Toni Braxton case as a perfect example. Toni Braxton, the famous singer, wired more than $50,000 to her estranged husband prior to filing her own bankruptcy. Braxton’s bankruptcy trustee is suing her estranged husband to recover the money. The trustee argues that the singer transferred the money to avoid paying it to the bankruptcy trustee.
Bottom line: Debtors can’t get away with this kind of thing, no matter what you have heard. The better thing to do is to hire an Arizona bankruptcy lawyer to help you minimize your loss in a legal way. There are so many better options by engaging in legal and easy “pre-bankruptcy planning”. It just isn’t worth it. Ask Toni Braxton.