I understand that when you are facing serious financial trouble, you do just about anything to keep your head above water. Many of these transactions are seemingly harmless. Unfortunately, if you are in such a financial bind that you are considering bankruptcy, it is important to consult with an attorney to make sure these otherwise harmless transactions don’t hurt you or delay your bankruptcy should you choose to file.
Selling Property for Less than it’s Worth
It is not entirely uncommon for someone to be a joint owner in real estate or have some stocks in a family business and then fall on hard times before the family business endeavor matures. When this occurs, often what you choose to do is sell your interest in the family business or the real estate for a nominal value and then use the money to pay bills. There is nothing inherently wrong with selling your property, but if you do not sell your property for a fair value and then file bankruptcy, you could run into problems. Transferring property for less than fair value could cause a delay in your bankruptcy and some unintended consequences to the person who purchased the property from you. After filing for bankruptcy, the bankruptcy trustee could either go back and force the buyer to turn over the property or pay a fair value for it. The trustee will then sell the property and divide the proceeds among your creditors.
Some people are just natural givers. Even when they are in a financial bind they will give someone the shirt off their back to help another out who may be even less fortunate. This could be a problem in bankruptcy. When a trustee sees that money or property is given away that could have been used to provide compensation to a creditor, the trustee could force you to either turn over the money or force the person who received the gift to turn it over.
While it is perfectly normal and appropriate to pay bills, buy groceries, and perform necessary repairs on your home or car, not all spending is appropriate if done just before you file bankruptcy. Unnecessary spending comes in many forms: the long-anticipated trip to Disneyland, gambling, pedicures, etc. You could find yourself having to pay for these unnecessary expenses twice if you later file for bankruptcy.
Paying a “Preferred” Creditor
Sometimes when you are in a financial bind you not only have loans from banks but also from family. When the tax refund comes in, naturally, the first person you want to pay off is your family instead of the bank. In most cases, this is not a problem, but if you later file bankruptcy it could be. The trustee could go to your family member and take the money and then divide it equally among all of your creditors.
How do You Fix It?
If you think you may need to file bankruptcy and you have done one of these things or are considering doing one, talk to an Arizona Bankruptcy Attorney. There are remedies and strategies to implement to minimize the impact of such actions or there are alternative actions to take before you engage in one of these actions. Call Riggs Ellsworth & Porter, LLC today at (480) 539-9400.