Fraudulent Transfers: Why Moving Assets Before Bankruptcy Backfires

A fraudulent transfer is one of the most common ways people damage a bankruptcy before it even starts. It usually begins with good intentions: deeding a boat to a brother, moving savings to a parent’s account, or selling a car to a friend for a token amount right before filing.

Bankruptcy trustees look for exactly that. Under section 548 of the Bankruptcy Code, a trustee can undo transfers made within two years before filing if they were made to hinder creditors, or if the debtor received less than reasonably equivalent value while insolvent. Florida’s Uniform Fraudulent Transfer Act, Chapter 726, gives trustees an even longer look-back period, generally up to four years.

When a transfer is undone, the property comes back into the bankruptcy estate. The relative or friend who received it may be sued to return it or its value. That can strain family relationships at a hard time.

The consequences can go further. A debtor who transfers property with intent to hinder or defraud creditors can be denied a discharge altogether under section 727. In serious cases, concealing assets is a federal crime.

Bruner Wright, P.A., a Florida bankruptcy firm based in Tallahassee, points out that many people don’t need to move anything. Florida’s exemptions are among the broadest in the country, including an unlimited-value homestead within acreage limits and protection for many retirement accounts. Property that’s already exempt is safe without any transfer.

The safest approach is to list every transfer from the past several years with an attorney before filing. Some can be explained. Others may call for a different filing date or a different chapter.

This article is general information and not legal advice. Every case is different, and no outcome can be guaranteed. Bruner Wright, P.A. is a debt relief agency that helps people file for bankruptcy relief under the Bankruptcy Code.