There Are Major Risk Involved When You Lie During A Bankruptcy
Video Transcribed: Edward Kelley with 888 debtline answering your bankruptcy questions. We’re going to do a quick one today answering a question I get a lot, and one that you need to be very careful of. Hey, can I put my house, my second house in grandma’s name? Or can I give my truck to cousin Bob and then file the bankruptcy, and not worry about losing it? And I’ll give you the quick, easy answer, which is absolutely not.
So there’s something called a fraudulent transfer, and it’s a legal term you don’t just find in bankruptcy, but it certainly applies in bankruptcy a lot. We talked before about your exemptions, and I’ll just talk about this in terms of a chapter seven, but it applies to any bankruptcy. You’re going to be exempt, and it varies by district, how much, for example in Oklahoma has a great exemption within city limits. In less than an acre, for all intents and purposes, you get an unlimited exemption on your home.
But let’s say you have a second lot or you have a little acre and park in the mountains with a little cabin on it, or any other real property that you have. Or let’s say you have some jet skis. Let’s say you have your Corvette from high school that you’ve had all these years and you keep polished in the garage and go look at it at night. Anyway, any of these extras, you’re exempt on your own vehicle, one per person relation to a married couple, up to $7500 in equity and your home, as I just described you’re exempt. They can’t take those.
However, let’s say that your Harley, this comes up probably more than anything. Your extra Harley. So, if your Harley’s your only vehicle, then that can be your vehicle. But let’s say your Harley that’s been paid off and that you love to ride on the weekends or it’s your pride and joy. So as far as that, let’s take the real property first.
So it’s almost guaranteed that the trustee is going to take a secondary property that is not your domicile. That is not going to be exempted at all. So a lot of people in that situation, Hey, I’ll just deed it over. Quit claim it to grandma. Huge no no. And that’s one of the first questions that’s asked. There’s something called the statement of financial affairs. It’s one of the schedules, one of the documents in your bankruptcy, whether you’ve done anything like that.
Have you transferred anything to a relative and there’s various time periods of years that they go back, or to a trust. That’s another big one, I think that one goes back like 10 years. Did you transfer any property? Trustees are looking for this right off the bat because a lot of people try to do it and the times vary, but the basic rule is if you have transferred something with the intent to keep it out of the bankruptcy, the trustee actually has the power to avoid that transfer.
Another legal term just means they can negate it. So if you transferred it to grandma they can just take it to grandma and that’s not it. If that is found to be fraudulent, which something like that definitely looks like it is, you can lose your exemption on your home and you can’t just count on hey, I’ll just dismiss the case and get out of it.
That can be denied as well. You know that is a very, very dangerous thing to do in a bankruptcy. So without going into all the details, just know this. If you’ve decided to do a bankruptcy, just pretty much bank on the fact that you better not transfer anything; real estate transfers, even car sales can be found in databases. Certainly anything that results in any kind of 1099 capital gains or any record is going to be available to that trustee as an employee or contractor in the case of chapter seven attorneys. The trustees have access to all the federal databases. So that’s my word of caution for today.
If you’ve got an extra property, you don’t want to lose, a boat, your prized Harley or old Corvette, here’s what you can do: you can sell things for their fair market value to disinterested parties. Now lots of people try, Oh I sold it to my mom for $1000 you know a $10000 motorcycle. Once again, probably fraudulent transfer, not going to fly can be avoided and could get you to lose some of your exemptions.
However you sell your Harley fair market value, and you spend that money as you would normally, six months later you filed bankruptcy. Not a problem. But again, this is based on legitimacy. If you sold that and this happens, people sell off their stuff trying to keep themselves afloat, even that doesn’t work.
So they go into a bankruptcy, that’s fine. The thing to watch here is don’t lie, don’t pull tricks because there are definitely huge consequences possible to you, if you are caught doing that in a bankruptcy. And I can tell you that myself as a bankruptcy attorney, once you tell me something, I’m stuck with it.
I’ve had people say, “I’ve got this lot”, and then I say, “Well that’s not going to be exempt.” “Well I’ll, you know what, forget I said that”. And any attorney that plays along with that kind of thing, you should be very, very wary, well I’ll just say don’t use them because anyone with those kind of ethics is probably known to everyone, including all the trustees as that kind of person. And they’re going to pull your case apart because they know the kind of clients that this attorney puts forward.
So anyway, that’s my big stern warning for today and look forward to talking to you again soon at 888 Debtline. Once again, you can always reach me at 888 Debtline, or email me at email@example.com.