Factors to Consider When Selling Assets Before Bankruptcy

In order to pay debts, many people sell off their assets but there are few risks involved in selling whole or certain part of their assets. The reason is that assets are there to pay off the debts and not to give favor to any one or two creditors over others. Selling of Assets before Filling Bankruptcy: Before a person files bankruptcy, the US Bankruptcy Trustee scrutinizes the sales and transfer the person has made through assets. Not only this, but the Trustee can seize the assets from those people who have received these assets. If the debtor refuses to accept the reorganization plan in bankruptcy, the Trustee can penalize the debtor which includes banning some exemptions or denying the right to discharge the debts. Factors the Trustee will Review: Value of Property: The assets sold such as cars, house, personal possessions, are approved only if the debtor gets fair market value. In case the sale value is far lesser and reduced, the Trustee may question such sale. In order to make deals, the debtors are pressured to bring money. When the assets are sold, the Trustee reviews the sold assets gauges their market price and compares to the closed deal. Although the Trustee acts on behalf of the creditors, however, it is good for the debtor. When the Trustee invalidates the sale to make the right deal, the creditors receive more money, which in turn helps the debtor pay off more debts. In case of secured assets, they are not sold unless the approval of the creditor is received who possesses the security home. In the case of houses, the mortgage holders retain this security interests. In order to give the clear title to the property, the agreeing of mortgage holders is necessary. This is the reason that most of the homes before bankruptcy are sold. However, in case of not getting fair market value, the sale can be questioned. Similarly, the selling of cars needs the approval of the finance company that possesses the rights to the car. Protection of the Property by Exemption: Usually, the debtors are subject to the state of federal exemptions. For home, cars, household goods, and other assets, there are certain exemptions. In case a debtor has personal exemptions in assets as well as the property stands less than a personal asset in terms of its worth, the Trustee may not object the sale. Equity in Assets: In the equity of assets, the same idea is applied in order to sell the asset to pay off the creditors. In case, after the secured creditors, the value of the property paid is lesser than the exemption, the Trustee will not object the sale. The Trustee will question the sale provided the fair market value is not gained, in case the value of asset and or equity in the property is higher than the personal exemptions. In case the debtor wants to keep the property and uses the exemptions, then selling it before bankruptcy is not needed. The Sold Property: The Trustee possesses the authority to gauge the sales within two years of the filing of the bankruptcy date. In case of property sold inappropriately, the Trustee can sue such deal. The buyer, in this case, can become the creditor claiming money form the debtor in the court. The Proceeds: In case the debtor saves the money from the sale and readily gives to the Trustee, then the Trustee will favor the sale. Otherwise, the Trustee will fight the sale to get the money and may penalize the debtor for the improper use of money. Legal Assistance: In these cases, the legal expert becomes of great help. The attorney helps in reviewing the sale of the assets while you plan for the bankruptcy. Consulting a bankruptcy attorney before filing for bankruptcy will help the debtor understand the true value of his or her assets.