Perhaps the most frequently asked question when filing for bankruptcy is whether you can keep your car. While the answer to that question depends on several factors, sometimes the problem is the opposite and the question is can i sell a car before bankruptcy?
Car Sales Before Bankruptcy
If you have an old $2000 car that you are selling, and you use the money to pay the rent arrears, this will be considered “fair use” for the property. However, if you sell the same car and still have the money when you file for bankruptcy, you are expected to turn over the cash to the trustee for the benefit of your creditors.
Let’s take the same car, and make it a second car in your house. One car is released from bankruptcy up to $6600. However, the second car is considered equity that can be included in bankruptcy. What if you “sold” the car to your brother for $10 (even though it cost $2000) and kept the car in your garage?
In this case, you have disposed of the property, but effectively the vehicle never leaves yours and you give your sibling a “very good deal”. If you file for bankruptcy sometime later, you must disclose the details of this sale and your guardian will be in a position to own the vehicle and sell it at a fair market price.
One of the common problems that occur when someone decides they want to consider filing for bankruptcy is that they have recently sold their car. In most cases, they do it because they need the money. They try to find a way out of their financial situation by seeking additional funds. It seems logical. But there is a slight problem because you are not supposed to transfer assets before filing for bankruptcy.
In some cases, selling your car before filing for bankruptcy can be a big deal. Under the bankruptcy code, applicants may be required to disclose all sales or transfers of assets within the two years prior to filing. Different time periods apply according to the applicant’s country of residence, but two years is the minimum disclosure period in the bankruptcy schedules.
Bankruptcy applicants often need to sell items before filing for a variety of reasons: needing cash to pay rent or utilities or even their bankruptcy attorney’s fees. As long as the asset is sold for its current market value and the transfer of the asset is disclosed in the bankruptcy documents, you are in compliance with the law.
bankruptcy is what you do with the money after the sale. Discuss what you can do safely and legally with the proceeds of the sale with an experienced bankruptcy attorney in your area. In some cases, you can sell your assets, put them in the bank, file for bankruptcy, and still protect the money. In other cases, you are asked to spend money and keep a detailed list of what the money was spent on.
If you have questions or concerns about what you can legally spend before filing for bankruptcy, please contact one of the experienced bankruptcy attorneys in Oklahoma.