Should You Wait a Year to File Bankruptcy After Moving Money?

Question from Carol, Should You Wait a Year to File Bankruptcy After Moving Money?

Answer from AI:

If your mother moved her money out of a joint bank account and you are considering filing for bankruptcy, there are several important factors to consider. Bankruptcy laws in the United States are designed to ensure fairness to both debtors and creditors, and certain actions taken before filing can impact your case.

Understanding Bankruptcy and Asset Transfers

When you file for bankruptcy, the court will scrutinize your financial transactions leading up to the filing. This includes any transfers of money or assets. The key concern is whether these transfers were made to hide assets from creditors.

Look-Back Periods

Bankruptcy courts have “look-back” periods during which they examine your financial transactions:

• Chapter 7 Bankruptcy: Typically, the court looks back 90 days for preferential payments to creditors and up to 1 year for transfers to insiders (family members, friends, etc.).
• Chapter 13 Bankruptcy: Similar look-back periods apply, but the specifics can vary based on the case.

Fraudulent Transfers

If the court determines that the transfer of money was made to defraud creditors, it can be considered a fraudulent transfer. Under the Bankruptcy Code (11 U.S.C. § 548), the trustee can recover these assets for the benefit of the creditors.

Steps to Take Before Filing for Bankruptcy

If you are considering filing for bankruptcy, here are some steps you should take:

1. Consult with a Bankruptcy Attorney: Given the complexities of bankruptcy law, it is crucial to seek personalized legal advice. An attorney can help you understand the implications of the money transfer and guide you through the process.
2. Gather Financial Records: Collect all relevant financial documents, including bank statements, tax returns, and records of the money transfer.
3. Evaluate the Timing: Depending on the specifics of the transfer, waiting a certain period before filing might be advisable. An attorney can help you determine the best timing.
4. Understand Exemptions: Each state has its own set of exemptions that protect certain assets from being seized in bankruptcy. Familiarize yourself with these exemptions to understand what assets you can keep.

Resources and Further Reading

For more detailed information, you can refer to the following resources:

• Bankruptcy Basics from the U.S. Courts
• 11 U.S.C. § 548 – Fraudulent Transfers

When to Seek Legal Advice

Given the potential complexities and legal ramifications, it is highly recommended to consult with a bankruptcy attorney. They can provide personalized advice based on your specific situation and help you navigate the legal process effectively.

Remember, this information is intended to provide a general understanding and should not be taken as specific legal advice. Always consult with a qualified legal professional for advice tailored to your circumstances.