Posted by Wesley Scott on November 4, 2018 at 9:55 AM
Wesley Scott

So, you are thinking about filing Chapter 7 Bankruptcy and you say to yourself, I don’t want to lose my Harley Davidson worth 8k and no liens against it right? So, what do you do? You transfer the title to the Harley to your brother for nothing. Problem solved right? Wrong!

Section 548 of the Bankruptcy Code allows a Chapter 7 trustee to void a transfer of property of the debtor within 2 years prior to filing bankruptcy, for less than fair market value. In the case above, chapter 7 trustee could void the transfer of the Harley, sell the bike, and use the proceeds to disburse to unsecured creditors.

What about this? Debtor gives adult child a car for college graduation present. Car is worth 10k and was given to adult child 18 months before filing the Chapter 7 Bankruptcy. Same result- child received an asset belonging to debtor for less than fair market value. Technically, all gifts given by debtor are also subject to claw back within two years of debtor filing Chapter 7 Bankruptcy. However, you won’t see most trustees going after token gifts because A) there is not enough value and B) it would be really time consuming to go after token gifts. The reward would not be worth the effort.

The lesson in all of this is clear. If you are contemplating bankruptcy, ask yourself what you have transferred in the last two years for less than fair market value. Also, don’t transfer any assets to anyone for less than fair market value if you don’t want a Chapter 7 trustee to void the transfer anyway.


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 so happy you did!

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Topics: Chapter 7 Bankruptcy, Filing Bankruptcy, MN Bankruptcy

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