Debtor's Transfer of Property to Wife is Fraudulent as Prepetition Planning

A debtor's transfer of his interest in real property to his wife in advance of filing bankruptcy is fraudulent when made with the intent to delay, hinder or defraud creditors. In a process termed "bankruptcy planning" debtors seek ways to maximize exemptions and assets in a bankruptcy. Although there are certain limited exemptions for both real and personal property, overreaching is fraudulent. A debtor may use cash on hand to pay debts that will not be discharged such as child support, spousal support, taxes or secured debt rather than paying unsecured creditors whose claims are likely to be discharged in the bankruptcy. Debtors may convert some non-exempt assets into exempt assets. However, a debtor may not take loans for the purpose of purchasing exempt property, increase unsecured debt in advance of filing or transfer assets to a spouse or other insiders for inadequate consideration. When such transfers are made the court will infer an intent to delay, hinder or defraud creditors. If you are considering bankruptcy you should seek experienced legal counsel immediately in order to fully protect your rights, avoid dismissal of your petition and understand how the bankruptcy laws can help you. For more information on foreclosure, bankruptcy or other consumer debt related matters in New Jersey visit TheNJBankruptcyAttorney.com. This blog is for informational purposes only and in no way intended to replace the advice of an attorney regarding your specific matter.