Selling personal property before bankruptcy: guidelines and disclosures.
Guidelines and Disclosures
Hi everybody, Edward Kelley here again, your Oklahoma bankruptcy attorney, with another 3 minutes to financial freedom. Today we’re going to talk about a question I get asked a lot. Can I sell personal property right before bankruptcy? And the answer is yes, if you do it right.
So how does that work? Well, let’s start with what you can’t do. You can’t sell to Cousin Bob or to your mom or to anyone else for less than fair market value. So let’s say, as we’ve talked about in previous videos, you get an exemption or you get protection for one vehicle up to $7,500 in value. Well, let’s say you’ve got two paid off. One of them is worth three to four grand. You’d probably lose it if you just filed the bankruptcy.
So what can you do? Well, in that example, you can sell that vehicle as long as you sell it on the open market for fair market value to the highest bidder. It doesn’t mean you have to go to extraordinary lengths to do that. And it doesn’t mean you absolutely can’t sell it to a family member. But know that you’re going to have to disclose that transaction in the bankruptcy. And the first thing the trustee is going to ask is how much did they pay for it? And they’re going to look up the blue book. And if it’s not close, they can do what’s called avoid the transfer. And they can take that car away from your relative and void the whole thing as a fraudulent transfer.
Disclosing the Transaction
So again, what you need to do is sell it on the open market. Then, of course, what about the proceeds? So let’s say you do sell it for $3,000 and now you’ve got $3,000. And keep in mind, again, you’re going to have to explain to the bankruptcy court or to the bankruptcy trustee. OK, I sold it for $3,000. Here’s what I spent that $3,000 on. Because they want to be sure you didn’t stuff it under your mattress, which would be money they can take or use it in some fraudulent manner.
So the quick answer is you’re allowed to do whatever you want before you file. The court has no jurisdiction. But know that you have to disclose it and you’re going to have to explain it. Now, if you sell that car for $3,000, you use $1,500, for example, to pay me to become your attorney. You use the rest for monthly expenses because you’re broke. That’s absolutely OK. You just be prepared to say this is who I sold it to. Here’s the blue book. And here’s how I use the money. If you’re good with that, you’re going to be good with the bankruptcy court.
Free Consultation
This has been Can I Sell Personal Property Before Bankruptcy? We’ll be back tomorrow with another video. As always, you can reach me at oklahomacitybankruptcyattorney.pro.