While it may seem like a good idea to sell or transfer your assets to protect them or pay off your debt to family or friends before filing for bankruptcy, it’s best not to do it. There are two reasons for that. First, the Trustee handling your case may be able to recover gifts and transfers within two years before the bankruptcy filing date and repayment of loans within one year before the bankruptcy filing date, to family and friends. Second, such actions may raise a red flag that will cause parties of interest to take a closer look into your case resulting in a lengthy and sometimes more expensive proceeding, or even worse, by uncovering something you are not aware of that may lead to denial of discharge. The bottom line is this will not help your case, but don’t despair! There can be options to make the proceedings easier, and it may be possible to take similar actions with safe legal backing.
If you’re considering filing for bankruptcy, make sure to consult with a bankruptcy attorney to guide you through how to make actions that will protect you and your case. If you’re uncertain, our Honolulu team is here to help.