One of the most common questions that I receive as a Nashville Bankruptcy lawyer over the past 20 years is, “Can I transfer property that I own to someone else and then file bankruptcy?” While this may sound like an easy way to keep things that you own and still get rid of debt by filing bankruptcy, this is probably one of the most dangerous things that anyone could do in contemplation of a bankruptcy filing. The Bankruptcy Laws are very strict and watch very carefully for this type transaction, and anyone filing bankruptcy will be questioned extensively about any transactions whereby they sold or gave away or transferred property that they may have owned to another person before filing bankruptcy. Section 543 of the bankruptcy code deals specifically with fraudulent transfers and should a person be found to have committed a fraudulent transfer, not only could you possibly not receive a discharge of your debts in your bankruptcy case, but you could also suffer criminal penalties that could result in a fine and prison time.
Obviously, with the severe penalties that can occur in the event of fraudulent transfers, it is absolutely necessary that anyone thinking of bankruptcy be completely honest with both their attorney and the court about all of their assets and any transactions that have occurred concerning assets and property in the past. Only by being completely honest and open with the court and everyone involved with the bankruptcy proceeding will persons receive the benefits of the fresh start and the relief of their debts that they are seeking by filing the bankruptcy case.
As credit card debt underlies many bankruptcy filings, it is not surprising that prospective bankruptcy filers want to know if they should stop paying credit card debt if they plan to file for bankruptcy.
At first blush, the answer to this question should be obvious - why should anyone “throw good money after bad?” However, I think that your decision in this matter should merit some thought.
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Credit card companies, or any creditor for that matter, can sue a debtor and may be able to take the debtor’s home, real estate, car, boat or any other personal property they own. People seem to think that if they don’t sign something that gives a creditor a lien on collateral, the creditor can’t take it. That is not true. Further fueling this misconception is the advise of so-called money experts like Suze Orman, who I have personally heard give false information that creditors can’t take a person’s home. Creditors can sue a person and take their home, car and other property - and they do!
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