What happens if I transfer my interest in my house or other property without receiving fair market value within one year before I file Bankruptcy?
You will likely cause yourself a lot of problems.
One problem is that the Trustee or a creditor may file an action against you in the Bankruptcy Court to prevent you from obtaining a Bankruptcy Discharge of your debts.
Section 727 of the Bankruptcy Code provides for the Discharge of the debtor except under certain circumstances. The first section provides as follows:
(a) The court shall grant the debtor a discharge unless-…
(2) the debtor, with intent to hinder, delay, or defraud a creditor or an officer of the estate charged with custody of the property, has transferred, removed, destroyed, mutilated or concealed-
(b) Property of the debtor, within one year before the date of filing of the bankruptcy.
Typically, a person hastily transfers property without receiving fair market value or legal counsel because they fear that a creditor will take the property from them to pay a debt.
This is not the only problem a transfer could cause with your bankruptcy because the Trustee has other ways to attack the transfer even if the transfer occurred more than one year before you file bankruptcy. I will discuss this in my next post.
The Trustee or creditor will still need to prove that the transfer was done with intent to hinder, delay, or defraud. Defending such an action, whether you win or lose could be quite expensive.
You should consult with your bankruptcy attorney prior to making any transfer of property.