You have the right to sell your property before filing for bankruptcy. However, the moment you file for bankruptcy, your home and everything in it becomes a part of the bankruptcy case. Intentionally, You will have to pay all your creditors to make sure not to deprive them of their money. Not paying is considered fraud and might turn to bigger issues.
Although selling property before bankruptcy can be tricky, it can be done. Here’s how.
- You can sell your property when necessities arise. Lacking money to buy food, make rent, buy your children clothing, or pay for medical costs? selling the boat or a luxury item and using the proceeds to buy necessities helps. Sell these things for their worth and keep a good record. In reality, most people are already cash poor before they file for bankruptcy, and can sell their property to fix necessities issues.
- On the other hand, get legal advice. If there are any other reasons you’d like to sell property, get a bankruptcy lawyer. The attorney will help to accomplish your goals in a right way, or will discuss the options on how to save a little money by not finding yourself in hot water with the bankruptcy court.
Get bankruptcy help by reading What Should I Expect From My Bankruptcy Lawyer?)
Problems Associated With Selling Nonexempt Property
A nonexempt property is a luxury item that isn’t needed to maintain a household or employment and is sold first when money gets tight. If you chose a sale of property or a pre-bankruptcy transfer, hot water is inevitable depending on the following factors:
- If the property is exempt or nonexempt
- period you made the transfer
- Did you receive a fair market value for the property
- The way you spent the proceeds, and
- The main reason you made the transfer.
At this point the court looks at each of these elements.
Did You Engage in Pre-Bankruptcy Planning?
Selling property before bankruptcy in Broward isn’t a problem because it’s not possible for a trustee to liquidate the property anyway. But selling an exempt property that is protected in bankruptcy can be under a little window.
Also , selling all of your nonexempt properties to use the proceeds in buying more exempt properties or paying down mortgages or liens on exempt property is ideal . This is the risky and scary part.
A nonexempt property sale to enhance your exemptions when you are aware that a bankruptcy lies ahead is generally referred to as “pre-bankruptcy planning.” Under the bankruptcy laws you are required to discourage pre-bankruptcy planning, especially when the intent is to delay ,hinder, or defraud creditors.
(Learn what happens when the bankruptcy trustee suspects fraud.)
How Long Ago Was the Transfer?
If the court decides to investigate a pre-bankruptcy transfer or sale of property, there will be some big questions. To what length will the court look back will vary depending on the type of property involved and the reason of transfer. In some cases, the reviewing time spans like a year or two. However, for certain transfers types , the court can go as far back as ten years.
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Disclose prior transactions on official form Your Statement of Financial Affairs for Individuals Filing for Bankruptcy when you fill out your bankruptcy paperwork.
Did You Receive Fair Market Value for the Property?
Receiving a fair market value your asset will play a role in determining if the transfer was done to delay or defraud creditors. Failure to receive fair value for the property transferred will cause the bankruptcy trustee to file a lawsuit called an adversary proceeding. This gives them the power to recover the property transferred.
Upon recovery of the property by the trustee, whoever received the transfer is permitted to make a bankruptcy claim in an attempt to get their money back. At this point claiming the property as exempt isn’t possible as you’d likely lose your exemption right.
(Find out more by reading What Is a Fraudulent Transfer in Bankruptcy?)
What Did You Buy With the Proceeds?
In some scenarios people in Broward or Miami, sell their exempt houses and buy new exempt properties. They then favour a particular creditor over others, increase the value of the old existing exempt property, or purchase luxury services, like an expensive vacation. This will bring the transfer under scrutiny.
What Was Your Intent When You Made the Transfer?
The court infers trying to figure out your intent from the circumstances surrounding the transfer and will put into consideration your testimony.
Cases are different for different people, and it would be an unwise choice to heavily depend on what was allowed in the past to determine whether a present transfer you make will be allowable.
It’s common that courts to find “badges of fraud” that can determine your intent, from a review list of:
- Did you received fair value for the property
- did you retain control over the property
- financial condition at the time of or just after the transfer
- whether the transfer was to a family member or other person close to you
- the transfer was in response to someone’s threat to sue you
- If you concealed the transfer, and
- financial condition at the time of or just after the transfer
There are rules that prevents the sheltering of Non-exempt Funds in an exempt residential property
Within 1,215 days prior to selling property before bankruptcy and using the proceeds to increase your homestead residence value the court will reduce your state homestead exemption by the total amount of the enhancement to the extent that the value will exceed the set limit.
See more on The Homestead Exemption in Bankruptcy.
Are you planning to sell a home while in bankruptcy? Or do you want to engage in selling property before bankruptcy? You will need to file a Motion to Sell Real Property with the court. This motion must include information like the house’s selling price and all the names of creditors who hold liens on the property. Do not get yourself stressed out in this sort of facing financial trouble, or wait to deal with a lawsuit. We are FASTBUYHOUSE. A great solution to sell any property in any condition. We buy houses in Broward.
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If you have any questions about how to Sell Property Before Filing for Bankruptcy, please drop it in the comment section below.