With every initial consultation, I always ask about whether you transferred any interest in any property. What I am really trying to find out is whether or not your engaged in what is known as a “fraudulent transfer.”
Under §548 of the Bankruptcy Code, a transfer is defined as any of the following:
1. The creation of a lien;
2. The retention of title as a security interest;
3. The foreclosure of a debtor’s equity of redemption; or
4. Each mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing of or parting with – property; or an interest in property.
This a list of the more common transfers that occur in the bankruptcy context: Gifts, Creating a lien to secure a debt, Changing the way title is held, Settling a dispute and giving up legal rights, Trading in a car, Giving used stuff to Goodwill or the Salvation Army, Selling a house, car, or stock, or being subject to a levy, garnishment, or judicial sale.
It is imperative that you list all of your transfers in your statement of financial affairs. If you fail to list the transfer, you may lose the right to recover the property or money that comes from the trustee’s liquidation of that property. If you fail to list the transfer, the trustee can sue the person you transferred the property to and include it as an asset of the estate and distribute it to your creditors. If you don’t list it or if there was no “value for value” exchange, you lose your rights in and to the property or any exemption that may have been available to protect that asset.