Filing for bankruptcy is extremely emotional and stressful. Often, years of hard work and a lifetime of possessions are subject to repossession by creditors because of a failed ability to repay debts. In that kind of situation, it can be tempting to try and save as many assets as possible. One strategy people try using is to give an asset away as a gift. Unfortunately, in many cases of bankruptcy, gift-giving is considered fraudulent activity. Therefore, before you attempt to give something away in an effort to keep it, you should understand bankruptcy laws.
If you’ve filed for bankruptcy, there’s virtually no need to hide assets. With a few exceptions, most property is protected from creditors under state and federal law. As such, there’s absolutely no reason to be anything other than entirely transparent during the bankruptcy process. That said, it’s still a good idea to have a full understanding of what are otherwise considered “fraudulent transfers,” or in layman’s terms, intentionally transferring an asset in such a way that conceals the asset’s value. As with many laws, intent or ignorance of the law doesn’t protect a violator, but by better understanding fraudulent transfers, you can ensure it doesn’t happen to you.
Understanding The Two Kinds of Fraudulent Transfers
To keep things simple, keep in mind that there are two kinds of fraudulent transfers. The first kind is considered “actual fraud.” This type of transfer is dependent on the fact that the violator willfully and intentionally committed the fraud. For example, you knowingly gave away or sold an item at a significantly reduced value to someone with the sole purpose of hiding it from a creditor. If it can’t be proven that you intentionally transferred an item in such a way, then it isn’t considered “actual fraud.” The specifics of “actual fraud” transfers are outlined in the U.S. Bankruptcy Code.
The second kind of bankruptcy fraud is called “constructive fraud.” Constructive fraud differs from actual fraud in that there doesn’t necessarily have to be intent on the part of the debtor to give the gift or sell the asset with the purpose of defrauding a creditor. Just as with “actual fraud” transfers, the specific parameters that outline “constructive fraud” are outlined in U.S. Bankruptcy Code under subsection B.
How To Avoid Accusations of Fraudulent Transfers
As a debtor, don’t worry too much about getting accused of committing a fraudulent transfer. There are a few common considerations that make it very unlikely that such an accusation would happen, but either way, keep the following in mind:
- Don’t Give Away Major Assets. Most debtors in times of insolvency don’t give away their assets. Instead, they typically hold on to them. If you’re not jettisoning all your major assets, don’t expect creditors to bat an eyelash.
- If You’re Charitable, You’re Usually Exempt. For the most part, the U.S. Bankruptcy Code makes very generous exceptions for most charitable giving, ensuring most gift-giving to charities is well above-board.
- Don’t Sweat the Small Stuff. If you’re giving away small gifts, these are rarely an issue. There is no clearly delineated number in the Bankruptcy Code, but if it’s under a few hundred dollars, then it’s most likely fine as far as gift-giving is concerned.
Keeping these tips in mind is a sure way to avoid charges of a fraudulent transfer.
Penalties for Fraudulent Transfers in Louisiana
Bankruptcy fraud is a white-collar crime that is not taken lightly in the state of Louisiana. A charge of bankruptcy fraud requires proof that you knowingly and fraudulently misrepresented a material fact. This includes giving away major assets to avoid them being considered in bankruptcy. It’s important to note that if you give a fraudulent gift, you’re not the only person who can face charges for fraud. The recipient of your gift is liable for bankruptcy fraud as well. Penalties for bankruptcy fraud are severe and include a sentence of up to five years in prison and fines up to $250,000.
If you are convicted of bankruptcy fraud, you’ll need a credible defense that stands up in court. A trusted attorney can gather evidence surrounding your case to do so.
Get Peace of Mind With An Experienced Bankruptcy Lawyer
If you’re concerned about whether or not a transfer might be fraudulent, that’s where consulting an experienced bankruptcy can make a world of difference. If you want the peace of mind that comes with an outstanding bankruptcy lawyer in Louisiana, look no further than the law offices of E. Orum Young.
At E. Orum Young Law, we have the necessary knowledge to answer all your questions about Chapter 7 and Chapter 13 bankruptcy. The attorneys at E. Orum Young Law are members of the National Association of Consumer Bankruptcy Attorneys. Likewise, they are members of the Louisiana Bar Association. With more than 20,000 successful cases filed and 35 years of experience, contact E. Orum Young today for your free consultation.