Many debtors attempt to sell some of their assets so they can have money to pay creditors, but there are certain risks in liquidating assets. These risks come about because assets are supposed to be sold to pay debts without favoring one creditor over others, unfairly. Read on to learn about selling assets before bankruptcy.
The court-appointed trustee will examine all sales and property transfers made before hiring someone from a law firm like the Cain Law Office. In some cases, trustees may try to seize assets from their new owners and debtors can be penalized for failing to follow a reorganization plan. Trustees review the following factors:
* The property’s value – Sales are more likely to gain approval if the debtor got a fair value. Debtors are often under pressure to come up with funds quickly, and it can be tempting to accept a low offer. Secured assets, such as homes and cars, cannot be sold without creditor approval, and they’re subject to stricter rules.
* Exemption status – Debtors are sometimes eligible for federal and state exemptions for tools, household items, cars, and homes. If a debtor has a personal exemption and the property is worth less than the asset, the trustee is likely to approve the sale.
* Sale date – Generally, a trustee can examine sales made within two years of the filing. They can file suits to recover improperly-sold property, and the buyer may be able to become a creditor. When fraud is alleged, trustees can look back longer than two years.
* Disposition of proceeds – If a debtor puts proceeds in a bank account, the sale will most likely be approved. However, if the money is spent, the trustee may fight to get the funds back and penalties may occur.
As with other legal matters, every case is judged on its own merits. Bankruptcy trustees determine whether a sale was done under fraudulent pretenses, or if it was done in ignorance of the law. Trustees evaluate which debts were paid. If proceeds were used to pay non-dischargeable debts, it’s better than if the money was used to pay an unsecured loan.
A bankruptcy attorney in Edmond, OK will work to prove that his or her client received a fair value for assets; that the assets in question were exempt, and that funds were spent properly. If a person is thinking of bankruptcy, he or she should consult a bankruptcy attorney in Edmond, OK before selling assets.