Bankruptcy Book

Clients often ask “Can I transfer assets or omit assets or debts from the bankruptcy paperwork to keep them out of the bankruptcy?”  The answer is no, and that is outlined in the bankruptcy book.  When you file bankruptcy, you must disclose everything that you owe to everyone.  Doesn’t matter if it’s your mother-in-law or your cousin that you received money from and that you owe, everything has to be disclosed.  That doesn’t necessarily mean that everything has to be placed in your bankruptcy.  You can, if you wish, the debtor may elect to pay a debt outside of bankruptcy or reaffirm a debt if that’s what they want.  It just really depends on how the debtor feels about certain debts.  As far as transferring assets, no, you cannot transfer assets within a certain amount of time.  The bankruptcy court is trying to stop is any kind of fraudulent activity that may occur with the debtor. 


For instance, in transferring assets, if you transfer your car to your uncle or your dad or your brother or your friend and you transfer title to them without any kind of consideration, that in turn could be an issue where the trustee could reverse that transfer of title and in turn sell any equity that is found in that car or that motorcycle or any kind of asset, for instance.  The reason they do this is because, once again, they’re trying to stop fraud.  You can see how there could be a lot of fraudulent activity if somebody knows that they’re going to file bankruptcy.  They could transfer everything that they have to their wife’s name and then have just that person file bankruptcy or they would omit the assets.  If they try to omit the assets and they find out about the assets, the trustee finds out about the asset, that asset can eventually be administered.  Consult with a Chicago bankruptcy lawyer prior to making any critical mistakes. 


So the answer to “Can I transfer assets or omit assets or debts from the bankruptcy paperwork to keep them out of the bankruptcy?” is no.  However, you can omit assets and transfer assets if you’re willing to deal with the consequences of (1) being fraudulent on your bankruptcy petition, which could in turn be a felony because it’s federal and defrauding the bankruptcy court could be a felony, (2) they can find out and they can reverse any transfer of assets to an uncle or to anyone, really; uncle, mother-in-law, sister, spouse, anybody that they transfer it to, they can reverse that asset, and if there’s equity in that asset, then that asset could be distributed towards the creditors.  The best bankruptcy advice is to make no transfer prior to filing and list everything on your petition 


If you are thinking of claiming bankruptcy, it’s always best to be honest about everything they have.  The debtor’s coming in to get help, and we, as attorneys, are here to help you.  This is what we do.  This is a service we’re providing, and we enjoy doing this.  The hardest part about it is if you’re not honest with us, you’re really just hurting yourself.   The trustee will find that, they will find you to be fraudulent in certain respects, and they could find you guilty of a felony.  They could charge you with a felony for defrauding the bankruptcy court, so that’s something we always, always, always try to make sure that the clients that are coming in are honest with us. 


And you should be honest with us because this is attorney-client privilege here.  It is simply between you and your chapter 7 bankruptcy attorney.  This is one of the biggest rules of being an attorney, is confidentiality.  This is all confidential.  Nothing is ever spoken to anybody.  Nothing is ever – there’s no communication about what you say to us.  So being honest is definitely the thing that we must do.  We must be honest here in order for us to have a smooth bankruptcy case and make sure nothing happens that could be very bad for the debtors, once again, such as felonies being charged or undoing of certain asset transfers.