What is a Fraudulent Transfer?

Posted by Wesley Scott on August 28, 2020 at 12:31 PM
Wesley Scott

consequences of bankruptcy fraudA fraudulent transfer occurs when an individual knowingly transfers property or ownership in property, in an attempt to reduce their assets and the amount of money a creditor can recover. It can also occur when property or assets are sold for less than fair market value. It is aptly termed because in the eyes of the bankruptcy code, transferring your property to someone else with the intent of keeping it from your creditors, is fraud. Not all transfers require intent to defraud your creditors though.

There are common ways attorneys and trustees will look for fraudulent transfers: selling property for less than fair market value; transferring assets to a family member or business partner; transferring ownership in the property to someone else, but keeping the property for personal use; becoming insolvent after the transfer; failing to disclose a transaction; or, conducting a transfer in an unusual way. Your attorney and the trustee will likely ask to examine bank statements and transaction history to help determine what is acceptable or what may need additional explanation and documentation for the bankruptcy.

These different situations are extremely important to disclose to your attorney because as a debtor, you will be testifying at your 341 meeting regarding these past experiences. If the trustee uncovers evidence of fraudulent transfers, you may have to pay the value of that property into your bankruptcy estate or the trustee will go after that family member or business partner to recover the money. It can also be construed as perjury for failing to disclose these facts. Once these facts are disclosed to your attorney, they are obligated to report them in the bankruptcy filing.

There may be items or events that have occurred that you may be unsure about. At Kain and Scott, we advise you to lay it all out for us so we can strategically figure out the best option for you.

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If you want to file bankruptcy, but are unsure what your circumstances mean, check out www.kainscott.com for information or schedule a free consultation now!

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