You may have tried to avoid declaring bankruptcy for as long and as much as possible. In doing so, you may have sold some of your assets that you could no longer afford and use these proceeds to pay your creditors the remaining balances owed. Well, unfortunately, this may not have been enough and you may have no choice but to turn to bankruptcy. Here, though, you may wonder whether the Kentucky bankruptcy court will be bothered by your recent history of selling assets. Follow along to find out whether the court will find it acceptable if you sell your assets ahead of bankruptcy and how a proficient Louisville, Kentucky consumer bankruptcy lawyer at Schwartz Bankruptcy Law Center can consult with you on this matter before you proceed any further.
Is it okay to sell my assets before filing for bankruptcy?
While it is important to prepare for your upcoming bankruptcy proceedings, there is such a thing as overstrategizing your bankruptcy filing. This is otherwise dubbed as prebankruptcy planning. That is, the Kentucky bankruptcy court may find a problem if you primarily sell your nonexempt assets ahead of bankruptcy. They may perceive it as your attempt to hinder, delay, and/or defraud your creditors.
Specifically, it is one thing to use these proceeds to pay off your outstanding creditors, as you would similarly do through your bankruptcy. Or, to pay for immediate necessities for you and your household, such as food, clothing, rent or mortgage payments, utility bills, medical bills, etc. But suspicions may grow if you use these funds to purchase new exempt property, increase the value of your existing exempt property, purchase luxury items, or otherwise.
On a similar note, it may not be in your best interest to sell your assets to close family members and friends or only use these proceeds to pay back your close family members and friends. This is what is referred to as a preferential transfer that the court can easily reverse in your upcoming proceedings.
What are the possible consequences of selling my assets before bankruptcy?
Say that the Kentucky bankruptcy court finds that you sold your assets before bankruptcy to purchase new exempt property or increase the value of your existing exempt property. In response, they may disallow or limit the exemption amount, bar you from receiving a discharge at the conclusion of your bankruptcy case, and deny your opportunity to file for bankruptcy again in the future. What’s worse, you may be accused of and ultimately found guilty of bankruptcy fraud, which carries a prison sentence of up to five years and a fine of up to $250,000.
Or, say that the court believes you preferred paying back one creditor over the others ahead of your bankruptcy filing. Well then, they may allow your trustee to file a lawsuit against them to recover these funds to pay back your remaining creditors fairly and equally. This may be allowed if this preferential transfer occurred within 90 days of your filing, or one year if it involved your close family member or friend as an insider creditor. And so, you may inadvertently make your close family member or friend the subject or unnecessary legal troubles.
To conclude, you must be fully equipped to enter your upcoming bankruptcy proceedings. Your preparation is incomplete without hiring a talented Louisville, Kentucky consumer bankruptcy lawyer. Contact Schwartz Bankruptcy Law Center today.
