How to Respond When You Have Been Sued for a Fraudulent Transfer in Bankruptcy

Wooden Blocks with the text: Fraud

Some Tips When You Have Been Sued for Making a Fraudulent Transfer in Bankruptcy

When you seek protection under the bankruptcy laws, you must comply with extremely stringent restrictions regarding the transfer of assets before and after your filing. If the bankruptcy trustee or the court has credible evidence that you improperly transferred property to keep it out of the bankruptcy proceeding, you may face legal action alleging bankruptcy fraud. Here are some steps to take if the bankruptcy court raises questions about the transfer of property.

Step #1—Take the Proceedings Seriously

If you are under investigation or have been charged, recognize immediately that it’s a serious matter. Immediately retain legal counsel to protect your interests and gather all documentation related to your bankruptcy filing. Find all paperwork that identifies when and why the property was transferred, as well as the fair market value of the property at the time of sale.

Step #2—Prepare Your Defense

You need to take prompt action to identify and support all potential defenses. As a general rule, many people in bankruptcy or facing bankruptcy make transfers of property without realizing what they are doing or that it is illegal. Because fraud requires intent, if you can prove that you didn’t know what you were doing (or that it was illegal), the court may conclude that the transfer wasn’t actually fraudulent.

It’s also important to understand that property that has no fair market value cannot be the subject of a fraudulent transfer. If you owe more on property than it’s worth and there would be no equity available to pay off creditors, the courts may conclude that the transfer wasn’t fraudulent. Assume that you have a car that’s only worth $1,000, but you owe $1,500 on the loan. It may not be a fraudulent transfer if you transfer that car shortly before filing for bankruptcy.

Contact Heath, TX Bankruptcy Attorney Carrie Weir

I provide a free initial consultation to anyone with questions or concerns regarding a bankruptcy filing. Contact my office by e-mail or call me at 972-772-3083 for a private meeting. With offices in Rockwall, Texas, I represent clients in Heath, Greenville, Lavon, Wylie, Mesquite and Rowlett.

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