Speak With a Bankruptcy Attorney to Ensure You Don’t Make These Critical Mistakes
If you’re struggling with debt and considering filing for bankruptcy, you may be picturing angry creditors soon swarming on your house to repossess your belongings. Suddenly everything is gone, and you’re left in an empty house (which you worry they’ll soon kick you out of as well).
To avoid this, you may be considering giving money or property to friends or family in hopes of keeping it away from your creditors. After all, if you don’t have it, the creditors can’t take it back, right?
Simply put: Do not do this!
These kinds of transactions are generally considered fraudulent, both in and out of bankruptcy court. Worse, these moves can taint your entire case, enticing judges to dismiss your case or even charge you with a crime.
Lots of people throughout history have struggled to pay debts, and lots of them have tried tricks to keep their property away from creditors. Lawmakers have constructed laws to prevent these tricks, and courts have seen and ruled on them. Don’t hurt your case by making these costly mistakes.
When you’re struggling with overwhelming debt, it’s time to speak with a trusted debt settlement attorney, such as Denver-based Wink & Wink. They can not only explore your debt settlement options, but they can also help you avoid actions that could be considered bankruptcy fraud.
Do You Lose All Your Possessions in Bankruptcy?
The good news is, filing for bankruptcy often helps you keep most of your exempt possessions. That’s right: keep! This can include your home, car, clothes, and other basic necessities.
Filing for bankruptcy doesn’t mean a nightmare scenario of surly workers in coveralls barging into your house to take every last thing you own.
However, that’s why it’s important to make sure you don’t commit any fraudulent behavior that the bankruptcy court could point to as a reason not to grant your bankruptcy discharge.
What Constitutes Fraud?
Bankruptcy law defines a fraudulent transfer as one which was done within the two years before filing bankruptcy AND one that was done with intent to hinder, delay, or defraud any creditor.
Bankruptcy law also yields to State law for fraud. In Colorado, this means the bankruptcy court can look back four years on transfers of money or property. If they determine you’ve fraudulently transferred property or money within that time period, you may lose your bankruptcy case.
The Ten Badges of Fraud
So, what does intent to hinder, delay, or defraud mean? Because people almost never admit to defrauding their creditors, the courts generally look to 10 badges of fraud to determine intent.
While interpretation of these badges can vary, there is precedent which says that more than one may have to exist to establish fraudulent intent. They are:
- “Special equity” – If you sell the property out from under a creditor’s interest, such as a security interest, this can be considered fraud. A security interest is a lien, legal claim, or collateral that you offered to obtain a loan.
- Special relationship – If you and the buyer or recipient of your gift are family, friends, or close business associates, you’ve taken a step toward committing fraud.
- Maintaining possession – If you, for example, sold your property to your roommate who will still let you use it, this can be considered fraud.
- Pattern of “sharp” dealing – If you’ve engaged in a series of moves to keep property away from creditors, your sharp dealing may be deemed not-so-sharp.
- Insolvent after transfer – If the transfer or gift leaves you now unable to pay your bills, fraud can be found to exist.
- Transfer after judgment – If you decide to start getting rid of assets after a creditor sues you and gets a judgment against you, your procrastination can be ruled fraudulent.
- Less than fair value – If you decide to give the buyer an amazing deal on your property by selling it for less than it’s worth rather than its reasonable value, that can also be considered fraud.
- Concealing transfer – If you’re transferring assets in an effort to conceal them from creditors, this can be considered fraud. This is the worst thing you can do and can lead to criminal charges. It’s essential you tell the truth about ALL your money and assets.
- Use of credit – Did you use credit to purchase exempt property? If so, you may have committed fraud.
- Total value of assets transferred – The bigger the total value of the assets you transferred, the worse it looks when determining if you committed fraud or not.
What If the Court Rules You’ve Committed Fraud?
If a court finds you’ve committed fraud, you’re at the mercy of a judge. In bankruptcy court, the potential consequences of a finding of fraud can be as light as a ruling that a particular debt is not dischargeable (i.e., you’ll still be required to pay that debt), to a ruling that none of your debt is dischargeable (i.e., you will still owe the money for all your debts), or that your case is dismissed. In extreme cases, the assets you transferred can be recovered and liquidated for your creditors, and you can even face criminal charges.
What to Do If You’re Considering a Potentially Fraudulent Transaction
If you’re unable to pay your bills, and you have property you’re worried about losing, speak to a bankruptcy attorney as soon as possible. Colorado’s Wink & Wink is a debt settlement law firm that works to help people keep their property. If the property turns out to be exempt, you can keep the property you’re worried about losing.
If the property is not exempt, and you can’t keep it, you may be able to keep the value by legally selling the property before bankruptcy and putting the proceeds into other, exempt property. As you might imagine, this is risky business and should be done under the advice of legal counsel.
What to Do If You’ve Already Committed a Potentially Fraudulent Transaction
If you’ve already violated one or more of the badges of fraud, the advice is the same: Speak with a bankruptcy lawyer as soon as possible. The determination of bankruptcy fraud is very detailed, and there are often things which can be done to help mitigate any of the damage you’ve done by acting without the advice of a lawyer.
Whether you have property you are worried about losing, or you have already disposed of some property in a way that may be deemed fraudulent, the best thing you can do is seek professional legal advice. You will likely find you have a surprising amount of options for what you can do.
Contact Denver debt relief attorneys Wink & Wink to get the help you need getting debt settlement. They’ll review your situation, work to get you a positive outcome, and help you avoid the critical mistakes that could harm your bankruptcy case. Contact us online or call 303-410-1720 today.