In addition to the Trustee and creditors’ ability to prevent a discharge under section 727 of the Bankruptcy Code for transfers with in one year of filing, there is another section of the Bankruptcy code to be concerned about.
Under section 548 of the Bankruptcy Code, a Trustee has the ability to go back two years prior to the date of filing bankruptcy to undue a transfer made with ”actual intent to hinder, delay or defraud any entity to which the debtor was or became, on or after the date that such transfer was made or such obligation was incurred, indebted;
Bankruptcy Code Section 548 is follows in part:
(a)(1) The trustee may avoid any transfer (including any transfer to or for the benefit of an insider under an employment contract) of an interest of the debtor in property, or any obligation (including any obligation to or for the benefit of an insider under an employment contract) incurred by the debtor, that was made or incurred on or within 2 years before the date of the filing of the petition, if the debtor voluntarily or involuntarily—
(A) made such transfer or incurred such obligation with actual intent to hinder, delay, or defraud any entity to which the debtor was or became, on or after the date that such transfer was made or such obligation was incurred, indebted; or
(B)(i) received less than a reasonably equivalent value in exchange for such transfer or obligation; and
(ii)(I) was insolvent on the date that such transfer was made or such obligation was incurred, or became insolvent as a result of such transfer or obligation;
(II) was engaged in business or a transaction, or was about to engage in business or a transaction, for which any property remaining with the debtor was an unreasonably small capital;
(III) intended to incur, or believed that the debtor would incur, debts that would be beyond the debtor’s ability to pay as such debts matured; or
(IV) made such transfer to or for the benefit of an insider, or incurred such obligation to or for the benefit of an insider, under an employment contract and not in the ordinary course of business.
So, transferring an interest in real estate or other property under the circumstances described in this portion of Bankruptcy Code section 548 can cause you significant problems in bankruptcy. It may result in the loss of very assets that you transferred in an effort to protect. Transferring assets to an “insider” such as a family member will result in increased scrutiny of the transfer. The Courts are split on whether transferring the property back prior to filing bankruptcy will undue the problem.
The Trustee also has the ability to go back further in time to undue transfers. For example, if the IRS is involved, it is a 10 year look back period.
You need to consult your bankruptcy attorney about the consequences of any transfer that you have made so that you can be properly advised.