How to transfer property prior to filing bankruptcy

Written by jackie lynn
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There are two types of personal bankruptcy a debtor or joint debtors can file, a Chapter 7 or Chapter 13. Chapter 7 bankruptcy is a liquidation of a debtor's estate. The money from the estate goes to the debtor's creditors to pay any debts approved by the Bankruptcy Court. A Chapter 13 bankruptcy sets up a repayment plan where a debtor or joint debtors make payments to a Chapter 13 Trustee for a period of three to five years. The Chapter 13 Trustee then takes those payments and pays off the debtor's creditors over time. Under both types of bankruptcy, transferring property right before filing is strictly prohibited and illegal. Any transfers of property immediately preceding a bankruptcy filing can be reversed by the Bankruptcy Court.

Skill level:
Moderately Challenging


  1. 1

    Decide when and what chapter of bankruptcy you wish to file. The sooner a debtor or joint debtors can decide when or if they wish to file for bankruptcy, the better. It is best not to consult with a lawyer at this stage as a lawyer will give strict instructions not to transfer any property to anyone prior to filing for bankruptcy. If the lawyer knows that you have transferred property prior to filing for bankruptcy, he or she will have a fiduciary duty to report you to the Courts. You must pick a date to file for your bankruptcy at least one year away from when you intend to transfer the property.

  2. 2

    Transfer any property you wish to transfer at least one year before filing for bankruptcy. To transfer your property, you must either sell it or give it as a gift. Keep in mind that if the gift is large, you may need to consult a tax attorney as it will affect your yearly tax return.

  3. 3

    Sign away any titles to vehicles, property or bank accounts. File the appropriate documents with the county clerk or Secretary of State for each asset. Keep receipts and copies of any transfers of title documents. The sooner you transfer title of the property prior to filing bankruptcy, the better.

  4. 4

    File for bankruptcy. Wait at least one year after transferring the property to file for bankruptcy. An attorney and Trustee will usually ask debtors if they have transferred anything of value within the past year (usually anything over £650), so make sure to wait at least one year before filing. Even so, sometimes the transfer of assets can come to the attention of the Courts and can be reversed by Court order, thus making the property part of the bankruptcy estate.

Tips and warnings

  • Transferring property immediately prior to filing bankruptcy is illegal and the Bankruptcy Court can reverse any transfers by Court order.

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