Very often before someone files a Missouri bankruptcy, they will give away, transfer, or loan some type of personal property to a friend or family member. Common examples would include paying back money to your mother on a loan that she gave you three months ago; Quit Claiming your interest in a jointly owned vehicle to your spouse; or simply gifting a sum of money to a friend. It is your right to do as you please with your property, but making certain transfers of this kind before filing for bankruptcy can result in negative consequences that you should be aware of.
To begin with, the bankruptcy court requires that when you file for bankruptcy in the state of Missouri that you disclose all transfers of property made to an ‘insider’ in the full year preceding the filing of the bankruptcy. An insider is described as a friend or family member. So if you paid $2,500 back to your brother for money that he loaned to you, this transfer would have to be disclosed. The reason why this type of activity needs to be disclosed is because the Bankruptcy Trustee may wish to demand from your brother that he turn over the $2,500. The Trustee would then use this money to go towards your unsecured creditors (like credit cards, medical bills, payday loans, etc.)
For example, if you give your car to your spouse by way of a Quit Claim Deed right before filing a St. Louis Chapter 7 bankruptcy, the Trustee will have the ability to ‘undo’ the transfer and demand that the car be surrendered (because the transfer was made to an insider). Or if you gift $8,000 to your best friend right before filing a St. Louis Chapter 13 bankruptcy, the Trustee will demand that you repay your unsecured creditors $8,000 over the course of your repayment plan.
Of course, most people do not want their friends or family members caught up in their bankruptcy. So if in fact you have made significant transfers to an insider in the preceding year, you may want to delay filing until a full year has passed. At that point, the Trustee is longer able to go after the friend or family member.
The affordable St. Louis bankruptcy attorneys at The Bankruptcy Company have been providing quality bankruptcy legal services for years. Our goal is to make sure that your assets are protected, and that the impact to your friends or family members is minimal.