One of the most commonly asked questions is: Why can’t I just transfer
the title to my car (or other significantly valued property) to a relative
(or other person) before I file for bankruptcy so that I will not risk
losing it to creditors in my bankruptcy case?
A transfer of ownership/title for this reason, done at a time when you
are insolvent ( which most people considering bankruptcy are) is generally
considered a "fraudulent transfer" and will result in one or
more undesirable consequences.
If the transfer is not disclosed in your bankruptcy petition, the matter
may be referred to the
United States Justice Department for criminal prosecution. A conviction for Bankruptcy Fraud can and often
does result in a prison sentence. Another consequence of a fraudulent
transfer is the likely request of the
Bankruptcy Trustee
to have the court deny the debtor any discharge of debts in the bankruptcy
case. Upon proof of a fraudulent transfer, most courts will grant this
request. A third common result of a fraudulent transfer is for the court
to order that the person who received the property turn it over to the
Trustee for liquidation (ie., to be auctioned with the proceeds going
to creditors).
The bottom line is: DON'T DO IT! Its not worth it. In most cases,
debtors do not lose any property. There are, however, cases in which not
all of a debtor’s property can be protected. If the value of the
property that may be lost in the bankruptcy is far less than the debt
being erased, the benefit of filing and receiving a release from crushing
debts will be well worth the deal.
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