My finances are in a mess. I am considering bankruptcy filing but I do not have enough money to pay the bankruptcy fees. I have a second automobile which is non-exempt under bankruptcy. Can I sell the automobile to raise cash for filing?
Are there any rules regarding selling non-exempt automobiles before filing bankruptcy?
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Answer:
When you file for bankruptcy under Chapter 7, a trustee is appointed to take over your non-exempt assets. Your non-exempt assets form your bankruptcy assets. The trustee will liquidate these assets to repay your creditors.
You are permitted to sell your non-exempt assets before you file for bankruptcy, but the sale must be for fair market value. You can use the proceeds to meet your living expenses or to buy an exempt asset or to pay the bankruptcy fee and attorney fees.
However there are restrictions on such sale. You cannot give such property away to friends and relatives and have them return it to you after bankruptcy. Any sale of non-exempt assets within one year before filing for bankruptcy at less than fair market value will be considered a fraudulent transfer. The trustee can seize and liquidate such property. Such a fraudulent sale can also invite criminal prosecution.
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Posted by Patrick Elaw on 14 Apr 2010