Can You Sell Assets before Filing for Bankruptcy?
Certain assets are exempt from creditors to satisfy a judgment against
you. In Michigan this includes things such as public assistance, Supplemental
Security Income, Social Security, veteran’s benefits, child support,
worker’s compensation, and unemployment insurance, among other assets.
You may sell exempt property before filing for bankruptcy so long as you
receive a fair price for it, but there is no real need to do so since
exempt property is just that, exempt under a
Chapter 7 bankruptcy.
Selling other, non-exempt assets before filing is discouraged, especially
when it is done to hinder, delay, or defraud creditors.
Bankruptcy courts can look back in time and investigate a transfer or sale of property
made before filing depending on the type of property involved, up to 10
years into the past in some cases.
Transfers can be investigated if you sold non-exempt property to purchase
new exempt property, increase the value of existing exempt property, prefer
a certain creditor over another, or purchase luxury services. In such
cases, you may leave yourself open for a lawsuit by one of your creditors.
Bankruptcy courts will try to determine your intent in transferring non-exempt property.
In doing so, they will look for factors such as whether:
- You received fair value for the property
- You retained control over the property
- You were in dire financial straits before or just after the transfer
- The transfer was to a family member
- The transfer was a response to a threat to sue you
- You tried to hide the transfer
The court does not need to determine what your intent was if you use your
state’s exemptions to sell non-exempt property within four years
of filing for bankruptcy. If you use the proceeds to increase the value
of your home in any way, the court can reduce your exemption by the same amount.
To learn more about which of your assets are exempt and whether you can
sell them, speak with our
Detroit bankruptcy attorney during your