Bankruptcy And Gifts
This article will discuss both the giving of and the receiving of gifts in bankruptcy. If you’d like to speak with a bankruptcy attorney today, call 704.749.7747 or click to request a FREE BANKRUPTCY CONSULTATION and we will reach out to you.
Receiving Gifts In Bankruptcy
Most gifts you receive can be kept. The key to a successful bankruptcy is disclosure. If you receive a gift prior to filing bankruptcy, you should disclose that gift. Generally, that gift will either be an asset (Diamond Ring), or income (Cash). When it comes to bankruptcy and gifts, you can generally use your Bankruptcy Exemptions to protect your assets from the bankruptcy trustee. If the gift is considered income for bankruptcy purposes, it will need to be counted and included in the Means Test calculations.
Gifts received after you file bankruptcy are typically not part of the bankruptcy estate, and therefore not a problem. A general exception would exist if you became entitled to the gift before you filed bankruptcy. In that case, the gift should be disclosed in your bankruptcy filing, and an exemption can be used to protect it—this, even though you haven’t received the gift yet at the time of filing.
Giving Gifts In Bankruptcy
If you give gifts to others before you file bankruptcy, there are instances where those gifts can be deemed Fraudulent Transfers. Fraudulent transfers are subject to being ‘undone’ by the bankruptcy trustee. In that case, the trustee can pursue the person who received the gift in order to have them turn it over to the court. Or, in the alternative, you can offer to pay the value of the gift to the trustee to settle the issue. As it relates to bankruptcy and gifts, this is obviously a horrible outcome, so the key to avoiding a situation like this is disclosing all gifts to your bankruptcy attorney before you file. Your bankruptcy attorney may recommend you wait a certain time to file, so that the gift is no longer an issue. Lastly, your bankruptcy attorney may recommend disclosing the gift with an explanation to the trustee as to why it should not be considered a fraudulent transfer.
Bankruptcy and Gifts Are Not Usually A Problem
For most people, filing bankruptcy is done out of necessity. It’s very infrequent that a client is giving away assets just before filing bankruptcy. Typically, clients have very few assets to their name when they file bankruptcy. If you’re in doubt about a transaction, simply tell your bankruptcy attorney and you can discuss how to address the item in your bankruptcy filing. Remember, if you’re filing bankruptcy and gifts are a concern, disclosure is the key.
The Statement of Financial Affairs is the part of the bankruptcy petition where you disclose gifts. The safe assumption is to disclose any gifts exceeding $600 (total) over the past 4 years to any individual. The same is true of charities, though the threshold for charitable allowances is much greater and again, typically not a problem.
Speak With A Bankruptcy Lawyer
If you’d like to speak with a bankruptcy attorney today, call 704.749.7747 or click to request a FREE BANKRUPTCY CONSULTATION and we will reach out to you. We know you have choices. We hope you choose to Recover With Us.