If you have gotten into debt and are considering bankruptcy, you may be concerned about protecting your assets. Chapter 7 bankruptcy, often ominously referred to as a “liquidation bankruptcy,” sometimes does involve the seizure and sale of a person’s assets in order to satisfy debts. In some instances, the desire to save personal or real property may transfer assets to friends or family in order to keep them from creditors. These kinds of transfers can often be deemed “fraudulent conveyances” by a bankruptcy court to “undo” the transfer and collect the property even though it was not in the debtor’s possession at the time he or she filed for bankruptcy.
How do Courts Determine Whether a Particular Transfer was Fraudulent?
There are two types of fraudulent transfers that can arise in bankruptcy: those based on actual fraud and those based on constructive fraud. To prove actual fraud, the trustee must show that the debtor had the intent to defraud creditors. A basic example of this situation occurs when a person transfers his or her property to a family member as soon as a creditor files a legal action to collect on a debt. On the other hand, constructive fraud occurs when the property was transferred for less than reasonably equivalent value and the debtor was unable to pay his or her debts at the time of the transfer or as a result of the transfer.
Thorough Use of Exemptions can Protect Property
If you are tempted to transfer property to keep it out of your bankruptcy estate, it may be wise to speak with an attorney before taking any action. In many cases, you may be able to keep most or even all of your property by using the exemptions that are available under the law. New Jersey and federal law provide significant exemptions for a variety of assets, including the following:
- Your home
- Your vehicle
- Retirement accounts
- Work tools
- Personal property
- Child support and alimony
Call a New Jersey Bankruptcy Attorney Today to Schedule a Free Consultation
If you are in financial trouble and considering bankruptcy, you should discuss your legal options with an experienced attorney. In many cases, filing for bankruptcy can help protect your assets from creditors while giving you a fresh financial start. For a free case evaluation, call New Jersey bankruptcy lawyer John Schettino today at 201-498-9768 or send an email to [email protected].