One thing people often fear when they think of filing for bankruptcy is the fate of their assets. Too many people make the mistake of attempting to hide or sell assets prior to their filing, leaving them at risk of a case dismissal or even suspicions of fraud.
The transfer or sale of an asset prior to or in bankruptcy is prohibited unless specific criteria is met. If you sell an asset prior to filing bankruptcy you must sell that asset for fair market value, meaning you cannot charge less than or more than what the asset is actually worth. Keep in mind that the asset’s value may have changed from the value of when you purchased it. The fair market value stipulation can make the sale of an asset difficult because it can be challenging to determine the fair value. In other words, selling your motorcycle to Dan from Craigslist may not be a safe option.
Once you have sold an asset you must report the income from that sale on your bankruptcy filing petition, along with all of your other financial details. Attempting to conceal the income is considered fraudulent alongside the action of giving an asset away to protect it from the case to begin with. If you used the money from the sale of the asset to pay down a debt, you must also report and have documentation of that payment at the time of your filing.
While the fear of losing assets isn’t completely unjustified, the truth is that the Texas bankruptcy exemption laws are very lenient in allowing much of your property to be protected from liquidation. Always be honest with your lawyer and abide by the rules of the bankruptcy code. The bankruptcy process is meant to help you, don’t take the wrong action and jeopardize your chances at a successful debt discharge.