The short answer to that question is definitely “No!”. Don’t do that because it would be considered a transfer with the intent to defraud, hinder, or delay your creditors, if done approximately within a year before bankruptcy. And, if you do make such a transfer, the court will deny you a discharge if the trustee or some other creditor wants to bring that action. You have to disclose that transfer.
Why would you transfer property to yourself and your wife right before the bankruptcy? If you live in a state that honors tenancy by the entireties – a special way to hold property jointly with your spouse – none of your creditors would be able to seize and sell that property in your bankruptcy case because you’d own it in a special, asset-protected way. Because you moved that property from a condition where they could seize it to a condition where they couldn’t seize it shortly before your bankruptcy, the Bankruptcy Code says that’s fraudulent to your creditors, it shows a form of dishonesty, and it will bar your discharge. That’s why it’s very important if you are going to do pre-bankruptcy planning to be very careful and prudent and to keep an eye out towards possible consequences of transferring property when transferred without the correct timing in mind.
If you’re concerned about the way you hold assets and you’re contemplating bankruptcy, please pick up the phone and call me at 410-484-9000.
