Filing for bankruptcy is an intimidating, scary process, and when you are anticipating doing so, it is natural to try to protect assets that are important to you and to provide for those who are closest to you. Before you do anything, it’s important to make sure that you know what you’re allowed and not allowed to do, as paying debts to friends or family members, or transferring savings or property out of your name and into a family member’s can lead to charges of fraud or preferential treatment. Your best bet is to seek advice from an experienced bankruptcy attorney before making any significant financial moves.

The first thing you need to know is that when you file for bankruptcy, you will be assigned a bankruptcy trustee who will oversee the process. That person will identify unprotected assets that can be sold and determine the value of the bankruptcy estate based on the paperwork that you provide. This “statement of financial affairs” generally lists your bank accounts and any property you own, have sold or transferred within approximately two years. This list needs to be complete and must reflect all details, including value of property and what was done with any proceeds.

If you made a decision to sell a piece of property to a family member for its fair market value, you should be safe – especially if you can show that you used the money to pay for basics like rent or food. You are also able to transfer something that would have been considered exempt. But if you transfer the property in order to try to keep it from being included as a salable asset, or process a sale that is far under fair market value either to get it out of your name or to satisfy a debt to somebody close to you, it can be considered fraudulent, and the sale can end up being voided by the trustee.

Selling property but retaining control over it is another questionable transaction that – at best – will require explanation. The most important thing to remember in approaching a bankruptcy is that you must be honest about everything that you do. If you try to conceal an activity or an asset it will be sure to come back to you and work against you.

For more information about what financial actions you should and should not pursue in a run-up to filing for bankruptcy, contact our experienced attorneys today to set up a time to meet.