Can I Sell My Personal Property to Someone for $1 Before I File Bankruptcy?

Occasionally, someone facing bankruptcy will transfer ownership of property to someone else (usually a friend or family member) for less than fair market value under the assumption that this transfer will protect the property during bankruptcy.  However, if the transfer is done within a certain amount of time from the bankruptcy filing, not only does it not protect the property, such a transfer can be a reason not to grant a discharge in bankruptcy entirely.

Section 548 of the Bankruptcy Code allows trustees to recover property that was transferred for less than fair market value in the two years prior to filing.  Additionally, Section 727 denies a Chapter 7 discharge to an individual who transferred property with the intent to hinder, delay or defraud creditors within one year of filing.  If you are considering filing for bankruptcy, you should consult with an attorney before transferring or selling any property to make sure that your actions don’t bring about the results you were trying to avoid.