What is a Fraudulent Transfer in Chapter 7 Bankruptcy

Posted by Wesley Scott on November 23, 2019 at 9:26 AM
Wesley Scott

Minneapolis-Bankruptcy-Lawyers-To-Watch-Out-ForFor this article, we only focus on what is a fraudulent transfer under Section 548 of the Bankruptcy Code? There are other state based fraudulent transfer and conveyance statutes but that discussion is for a different blog article.

Let’s assume you have had your meeting of creditors and the Chapter 7 trustee says, well I believe that transfer was a fraudulent transfer? You run home and start Googling what is a fraudulent transfer and how does it affect you right? I mean now your anxiety level is amped up and the trustee’s words has made you nervous.

In Chapter 7 Bankruptcies, the Bankruptcy Code give the Chapter 7 trustee the right to claw back transfers made by debtor within 2 years prior to filing bankruptcy that were fraudulent. Now one has to be careful here because you may think trustee has to prove you intended to “defraud” your creditors or you had some fraudulent intent when you made the transfer. Not so.

In fact, if debtor has transferred (sold, given away, or otherwise cause ownership to be transferred from debtor to a third party) within 2 years of filing bankruptcy where debtor received less than fmv for the items transferred that is a fraudulent transfer under Section 548 of the Bankruptcy Code. For example, say you sold your 2008 Chevrolet Impala to your cousin for $3,500.00 6 months before filing Chapter 7 Bankruptcy. But, let’s assume the car was really worth $7,000.00. In other words, you gave your cousin a good deal right? Yes, and once you file Chapter 7 Bankruptcy, Chapter 7 trustee can now pursue cousin for the $3,500.00 they received but didn’t pay for and use those proceeds to benefit all debtor’s unsecured creditors pro rata.

                                                                 CONCLUSION

     When the time is right, or when you are ready, reach out to Minnesota’s LARGEST bankruptcy law firm at www.kainscott.com. You will be so happy you did!

 

Take the first step toward  getting your life back  Let us help you get started on your road to a debt-free life Sign Up for a Free Consultation