Bankruptcy Alphabet A-Z – H is for How to ensure a smooth sailing to discharge in Chapter 7
Disclose, disclose, disclose.
My yoga teacher always says “when in doubt stick it out”. He means “stick your butt out” to make a yoga pose smooth and easy. The same concept applies to bankruptcy – ”when in doubt, disclose it” - it will make your way to Chapter 7 discharge go much smoother. I am referring here to transfers of property and money that you may have made prior to filing, but you may not think of them as transfers. Let me give yo some examples. Signing a quit claim deed is considered a transfer in bankruptcy. Assigning your interest in a limited liability company to an insider is also considered a transfer. Sometimes, even a judicially ordered sale of your property, over which you had little control, may be considered a transfer, if made within 90 days of filing. And then, there are the more obvious transfers, for example, repaying a loan to your Mom within a year of filing bankruptcy, or making large payments to a single creditor within 90 days of filing. The trustee can sue Mom or the creditor and demand a turnover of these preferential payments, so that the trustee can use the money to pay other unsecured creditors in the case.
Failure to list such transfers on your petition can lead to a delay or even denial of discharge. Any creditor in the case can file an action against a debtor for denial of discharge in a separate adversary proceeding. Such lawsuits can not only prove expensive to defend, but can prompt an investigation by a trustee, and hold up your discharge. So when you are in doubt as to whether a transaction is a transfer, tell your attorney about it, and let him or her decide whether it is a transfer which should be listed on your petition for you.
If you need to learn more about bankruptcy topics beginning with a letter H, click on the links below.