Sometimes when debtors find they simply cannot make their debt payments, desperation sets in and they begin the process of liquidating property they know they can live without. Oftentimes, these assets include jewelry, handguns, artwork and even tools. However, one of the problems is that if you liquidate assets and you still wind up filing for bankruptcy, these sales could potentially cause you problems.
The Look Back Period
When you meet with a Chapter 7 bankruptcy lawyer in Kennesaw, GA, you will have to fill out a number of forms including schedules of assets. As part of that schedule, you will be asked to list any property (personal and real estate) that you transferred or sold in the last 24 months. In some cases, trustees may ask for additional information including:
- Amount of sale – you may have to provide documentation showing how much you sold the property for as well as the fair market value of the property at the time of sale. If you sold the property to a family member for less than market value, the Trustee may use a process called “claw-back” where they will recover the property and sell it at fair market value to pay creditors.
- Use of proceeds – if you sell $5,000 worth of jewelry and turn around and purchase a large-screen television, the Trustee is going to be very unhappy. However, if that $5,000 is used to pay your mortgage, utility bills and purchase food, they will probably be fine with it. Make sure you have documented how you have spent money from any sales proceeds.
- Use caution with 401(k) and IRA – if you have liquidated funds from a 401(k) plan or IRA and used it to pay off family or friends for loans, you could be putting these otherwise exempt assets at risk in a bankruptcy proceeding. Make sure you let your Kennesaw bankruptcy attorney know if you have taken this step.
Protecting Yourself From Fraud Charges
It is seldom a good idea to sell property just before filing for bankruptcy as the sale could mean you are charged with bankruptcy fraud. If you are facing overwhelming debt, rather than selling off property to try to keep your head above water, consult with a Kennesaw bankruptcy attorney and see what your options are. While some property may be sold without problem, you could risk your right to file bankruptcy if you sell property, particularly if it is sold for less than market value.
Keep in mind, you should also avoid transferring real estate, automobiles and other property that can be transferred to spouses, children or family members prior to filing bankruptcy. While you may think this is protecting the asset, in the long run, it could cause you far more problems than you need. On top of no longer having access to an asset, you could be facing fraud charges and you could also forfeit your right to seek protection under Georgia bankruptcy laws.
If you are in debt, before you decide to start selling off your assets, contact Roger Ghai, a bankruptcy attorney in Kennesaw at the Law Offices of Roger Ghai at (770) 792-1000; unfortunately, sales of assets could prevent you from filing for bankruptcy and getting a fresh financial start.