Section 548 of the Bankruptcy Code addresses fraudulent transfers. The look back period is 2 years. If, within 2 years before you filed your Chapter 7 Bankruptcy case, you gave or transferred any asset to anyone else for less than fair market value that is a fraudulent transfer.
For example, if you sold a camper worth 5k to your brother for 1k within two years prior to filing Chapter 7 Bankruptcy, that is a fraudulent transfer. So brother would have received a windfall totaling 4k. Here is another example. Assume debtor gifted college age daughter a car worth 4k. That is a fraudulent transfer.
Is there a minimum? Yes, there is a minimum. The vast majority of Chapter 7 trustees will not go after token gifts given to family and friends at Christmas, weddings, or any other holidays or events. Now, technically a transfer is a transfer and we all do it and we all do it sometimes for less than fair market value. The issue becomes is it worth pursuing a modest transfer for the estate and in most cases it is not.
Are there defenses to a fraudulent transfer? No, there are not. It doesn’t even matter if debtor was not insolvent at the time of the transfer. This seems to be a rather harsh rule in a way. Why would debtors fraudulent transfer done 18 months ago when debtor was debt free, need to be clawed back when debtor now has debt?
The Bankruptcy Code does not always produce fair results and sometimes it produces rather obscene results. It is, however, very black and white. If you have made transfers for less than fair market value, please let your lawyer know!
When the time is right, or when you are ready, reach out to Minnesota’s highest google reviewed bankruptcy law firm at www.kainscott.com. You will be happy you did!