Dallas Bankruptcy - Non-Exempt Property Transfers

Is it ethical to transfer non-exempt property to a family member before filing for bankruptcy?  The answer is no. 

Making transfers in contemplation of bankruptcy can have negative results for the filer.  Ninety days before filing for bankruptcy it is presumed that you are insolvent or, in essence, bankrupt. 

Any transfers or payments might be treated as preferences.  Lenders or the bankruptcy court may feel that you are trying to avoid having to pay your debts by making preferential payments to one creditor over another, or by transferring property for less than its value to an insider or family member. 

For example, let’s say a person has a house that is exempt before they file for bankruptcy, but then they suddenly inherit ten acres of property.  That ten acres will not be exempt when they file.  They will have to pay back their creditors the value of the non-exempt ten acres, or the trustee might sell the property in order to do so. 

Transferring the ten acres to a family member ahead of filing could be considered an attempt to defraud creditors.  The best outcome in this case is that the bankruptcy court takes the property back and sells it to pay the outstanding debts; at worst the person could find themselves facing federal charges of bankruptcy fraud. 

 There are ethical ways to plan for bankruptcy.  Consult with a bankruptcy attorney to find out what legal options are available before you make a mistake.