BK 7 - How to hide assets?

[WagTheDog]

My husband needs to file bankruptcy - we want to go with chapter 7 but he has the home and a business in his name... Can I buy him out to take ownership of the home and business then he can file bk 7?

[Kristin36]

Business or personal BK? One doesn't have to affect the other. Which one is he filing for? Or is it indeed both?

Regardless, from this website http://www.baeandassociates.com/ba_3.html:

Any form of deceit risks the possibility of getting caught. You will have to swear under oath that you have disclosed all pertinent information, under penalty of federal prosecution. It is a federal offense to lie under oath, and the implications can be far greater than simply having your Chapter 7 Bankruptcy dismissed. The denial of your Chapter 7 Discharge is the minimum expected sanction of the Bankruptcy Court if they determine that you intentionally delayed or hindered or defrauded a creditor with an intent to remove, destroy, or conceal property; destroyed, falsified, concealed, or failed to keep books and records; or knowingly and fraudulently made a false statement claim or engaged in bribery or withheld from the trustee. The Bankruptcy Court may also deny a discharge should you fail to explain a loss of assets, fail to obey lawful court orders, or fail to cooperate in another case involving the insolvency.

From the Cornell Law School website:

Bankruptcy is governed by federal statute which supersedes state debtor-creditor law in circumstances where it applies.

A debtor may attempt to fraudulently convey a piece of property to avoid having it seized. State laws seek to prevent this type of property transfer. Many states have adopted the Uniform Fraudulent Conveyances Act or its successor, the Uniform Fraudulent Transfer Act.

Uniform Fraudulent Transfer Act.

http://www.law.upenn.edu/bll/ulc/fnact99/1980s/ufta84.htm

This site: http://www.insolvenzverein.de/archiv/vortragstexte/Pittaluga.htm states:

5) The Bankruptcy Code discharges the honest debtor from those debts that exist up until the time that the bankruptcy petition is filed. If the debtor is discharged by the Bankruptcy Court, his/her creditors are limited to receiving a distribution as may be permitted from the liquidation of the debtor's assets.

However, not all debtors receive a discharge. Section 727(a) enumerates 10 grounds upon which a debtor will not be discharged, and in certain cases, even if the debtor is to be discharged, Section 523 of the Bankruptcy Code excepts certain types of debts from the discharge provisions of the Bankruptcy Code (Section 727, 901, 1141, 1228 and 1328). The grounds upon which to deny a debtor a discharge include:

If the debtor, with the intent to hinder, delay or defraud a creditor or others, transfers, removes, destroys or conceals property of the debtor within one year before the date of the filing of the petition, or after the filing of the petition, that person is denied a discharge [section 727(a)(2)];

I think that answers your question.

[DocPC]

It is NOT the mission of this board to promote fraud......sorry.

[Kristin36]

My point exactly. That's why I posted what I did.

Although I did fail to mention that HIDING ASSETS is a white collar crime and carries with it severe penalities, up to and including prison time. Sorry for omitting that Doc.

[DocPC]

My point exactly. That's why I posted what I did.

Although I did fail to mention that HIDING ASSETS is a white collar crime and carries with it severe penalities, up to and including prison time. Sorry for omitting that Doc.

No problem hon, I was just making the point clear.

[LadynRed]

Precisely, hiding assets is BIG trouble.

Besides, what you propose would NOT work anyway. Any transfer of property like that would be considered a fraudulent conveyance and the Trustee could not only reverse it, but dismiss his case for substantial abuse AND have your DH brought up on fraud charges ! I don't think you want the FBI boys knocking on your door.

There are EXEMPTIONS in every state and its possible your home is protected entirely along with most if not all of your personal property. Exemptions vary by state and whether or not you can use Federal exemptions (not allowed in all states).

Before you go planning fraud, I suggest you find out EXACTLY what is exempt and what's not. If your husband's company is incorporated, its probably safe. If its an S-corp or not incorporated at all, it could be vulnerable.

GO TALK TO A BANKRUPTCY LAWYER FIRST !!!

[WagTheDog]

It would be a personal filing BK 7, he has the house and the building for his business in his name. Would it be fraud if we sold the property to someone else? Probably by doing that he wouldn't have to file BK, but if he still had to, would that hold us in jeopardy?

[chincheck]

If I were in this situation, I would be asking myself this question: "Could what I'm about to do land me in Leavenworth for 10 years?"

[LadynRed]

IF he sells the property/asset and STILL has to file for bankruptcy, it can STILL be seen as a fraudulent conveyance and a Trustee could actually REVERSE the sale to take posession.

IF he sells the property and doesn't have to file for bankruptcy now but decides to file later, then he would have to wait a LEAST a year after the sale of the property before fraudulent conveyance would be less of an issue. I won't say non-issue because a Trustee can go back as far as 3 years on the sale of major assets.

I'll say it again, look into what your exemptions are. Sale of assets may not be necessary at all.