Answer: First, if you are not truthful on your bankrutpcy forms it very well could be viewed as fraud; and there are ramifications of doing this.
Why would you not be truthful? If you need to hide something, maybe bankruptcy is not the best option for you.
Here is an article form our web site that relates to bankruptcy fraud:
Is Transferring a Property Before Going Bankrupt Seen As Fraud?
Fraud - trying to hide or transfer an asset prior to going bankrupt, not being truthful or fully disclosing all details, intentional deception made for personal gain
Interesting definition and quite broad I might add.
So what about selling or transferring a property or asset prior to going bankrupt so that you can either keep the asset or keep/hide the proceeds from the sale.
Obviously if it feels icky then it is icky; if it feels wrong, then it probably is wrong.
My advice always has been, and always will be: it is not wise to sell or transfer an asset prior to going bankrupt.
The bankruptcy forms themselves ask about any transfers or sales or property for the prior few years, so this does need to be disclosed, if you have sold or transferred property and do not disclose it, then it is as simple as lying.
Also, just because the bankruptcy forms ask about a few years back, the Official Receiver in a bankruptcy can look back even further if the need be.
And what if you have done this, what can the Receiver do, what’s the worst that can happen??
The Receiver could issue a BRO or bankruptcy restriction order against you, keeping you under the restrictions of bankruptcy longer than the usual 12 months and for up to 15 years!
They also have the authority to reverse the sale or transaction, meaning they can contact who you sold or transferred the property to and attempt to get it back or the cash equivalent of the value of the property.
It can get ugly there, bringing others into your bankruptcy.
I have heard of people not just giving a property to a family member to sort of hide it, but in some instances selling a property and using the proceeds to pay back a debt to a friend or family member; which is in essence preferring that person over their other creditors.
When this is found out, and you would be surprised how these things are uncovered, the Receiver asked the family member who had been paid for that money back.
When they family member stated they could not pay the money back, the Receiver then chased them for the money. I was never updated as to the outcome from this, but ultimately the Receiver could have made that family member bankrupt to get the funds back. And since the family member did own their own home, it could have been lost if they were made bankrupt.
So it gets not only ugly but complicated as well.
Some people in their querying this with me ask about being charged criminally due to misrepresenting something or committing fraud in their bankruptcy: I have not heard of anyone being charged criminally due to doing this, but that does not mean it has not happened. I suppose it would depend on the extent of things and what all had ben done.
Still, why even get mixed up on something like this if you don’t have to, and you don’t have to.
One person who I had spoken with years ago had mentioned they had transferred a car over to their son prior to going bankrupt.
The Receiver took note of this and issued the person with a BRO for eight (8) years.
Seemed like an odd amount of time, eight years, and also a bit harsh, but then again, I may not have been told all the details of the transfer.
So I suppose the word here from all this is to not transfer or sell assets prior to going bankrupt, and if you do make the decision to do this, be aware of the ramifications of such a move.