The short answer to whether you can transfer property out of your name prior to bankruptcy is no. This is deemed a fraudulent transfer under the bankruptcy code and can have some undesirable affects on your case.
Many times individuals looking to file bankruptcy will consider transferring a car or house out of their name in order to protect the property from their Creditors. This will usually result in losing the property altogether. For this reason, we recommend holding onto all property until completion of your Bankruptcy case.
Under Chapter 7 Bankruptcy, fraudulent transfers can be avoided by the bankruptcy Trustee (the person overseeing the case on behalf of the Bankruptcy Court and creditors). By avoiding the transfer, the Trustee can take the property from the recipient and then sell it. All proceeds would then be divided among the creditors.
Under Chapter 13 Bankruptcy, the bankruptcy Trustee will make the transfer known to the Bankruptcy Court. The Court will then require that the bankruptcy debtor pay all creditors at least the amount they would have received had a Chapter 7 bankruptcy been filed.
Under both Chapter 7 and Chapter 13 bankruptcies, debtors are granted exemptions. These are statutory dollar amounts, granted by Congress, and used to protect property owned by the debtor at the time of the bankruptcy case filing. Many times, the property that is transferred away is valued lower than the bankruptcy exemptions.
However, by transferring the property prior to the bankruptcy, the debtor loses all right to the property and all rights to protect the property using bankruptcy exemptions. The full value is then available to the creditors.
In all cases we would recommend discussing these issues with your bankruptcy attorney prior to making any transfer and filing any bankruptcy case.
