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byAlma Abell

America’s bankruptcy system contains privileges and protections for debtors, but there are negative consequences for those who act fraudulently during or before filing. In this article, the Lake Law Office PLLC will tell you more about fraudulent conduct and transfers under US bankruptcy law.

Fraudulent Transfers Under the Law

Fraudulent transfers occur when a person signs assets over to another entity or person with the intent to delay repossession or defraud creditors from collecting the same. Fraud can also occur when property is sold to an entity or individual for less than its market value; the latter definition does not consider the debtor’s intent when making the transfer. Because of the complex nature of property transfers, they should always be done under the guidance of a Bankruptcy Attorney at Lake Law Office PLLC.

How Bankruptcy Trustees Handle Fraudulent Transfers

Your court-appointed trustee is allowed to undo any transfer made within the two years before the date of your filing. Under the laws of some states, the trustee is allowed to block fraudulent transfers made within four years. The entity or person receiving the property may be required to return it to the trustee, or they may be required to make payments to the bankruptcy estate under the trustee’s supervision.

Bankruptcy trustees can petition for transfer avoidance on any property obtained within a decade of filing. Avoidance can happen if the transfer was made into a “self settled” trust, which is funded with money taken directly from the beneficiary. It can also happen if the debtor was responsible for the transfer, if the debtor is the beneficiary, or if the debtor acted with certain intent to delay, defraud or hinder collections.

How Bankruptcy Courts Handle Debtors’ Fraudulent Transfers

If a bankruptcy court determines that you’ve acted fraudulently during a transfer, your petition for a debt discharge may be denied. Courts also may refuse to issue a discharge order if you lied under oath during your case (or made omissions in connection with it). Denial may also occur if you don’tsufficiently explain how assets were lost, or if you refuse to obey an order of the bankruptcy court or other court. Some forms of bankruptcy fraud carry criminal penalties such as jail time and fines. To complete your case and stay on the right side of the law, you should consult with a Bankruptcy Attorney in Cornelius, NC.