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kicklaw40
kicklaw40, Attorney
Category: Bankruptcy Law
Satisfied Customers: 21
Experience:  I have been a bankruptcy attorney since 1998 and have handled hundreds of bankruptcy cases successfully.
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I received a life insurance benefit when my husband passed

Customer Question

I received a life insurance benefit when my husband passed and I gave some of that money to my children about two years ago. I now want to file bankruptcy. Would that be considered a fraudulent transfer?
Submitted: 4 years ago.
Category: Bankruptcy Law
Expert:  Roger replied 4 years ago.

Hi - my name is XXXXX XXXXX I'm a Bankruptcy litigation attorney here to assist you.

 

11 USC 548(a) says:

 

(1) The trustee may avoid any transfer (including any transfer to or for the benefit of an insider under an employment contract) of an interest of the debtor in property, or any obligation (including any obligation to or for the benefit of an insider under an employment contract) incurred by the debtor, that was made or incurred on or within 2 years before the date of the filing of the petition, if the debtor voluntarily or involuntarily-

 

(A) made such transfer or incurred such obligation with actual intent to hinder, delay, or defraud any entity to which the debtor was or became, on or after the date that such transfer was made or such obligation was incurred, indebted; or

 

(B)

(i) received less than a reasonably equivalent value in exchange for such transfer or obligation; and

 

(ii)(I) was insolvent on the date that such transfer was made or such obligation was incurred, or became insolvent as a result of such transfer or obligation;

 

(II) was engaged in business or a transaction, or was about to engage in business or a transaction, for which any property remaining with the debtor was an unreasonably small capital;

 

(III) intended to incur, or believed that the debtor would incur, debts that would be beyond the debtor's ability to pay as such debts matured; or

 

(IV) made such transfer to or for the benefit of an insider, or incurred such obligation to or for the benefit of an insider, under an employment contract and not in the ordinary course of business.

 

Thus, the trustee would have to be able to prove that you transferred this money with the specific intent to defraud the bankruptcy court of the money, which seems to be a long shot absent some solid proof to the contrary.

Expert:  kicklaw40 replied 4 years ago.
A finding of fraudulent transfer requires that the person making the transfer was acting with the goal of impeding creditors. This is a fact-specific question, so a bankruptcy trustee will investigate your financial situation at the time of the transfers to make a determination as to what your intent likely was. In some cases, for example, the person who made a transfer was, at the time of the transfer, employed and making payments on time for all of their debts and not in financial straits and it is clear that the gifts were made without thought to hindering creditors. A transfer made with this backdrop does not appear to be made fraudulently. On the other hand, if the person had a lawsuit pending, was unemployed, and/or was late on payments, at the time the gifts were made, it would suggest that maybe the gifts were made to keep the money out of the hands of creditors. With the latter situation, a trustee would likely have a strong argument that the transfer was fraudulent and therefore "un-do" the gifting.
kicklaw40, Attorney
Category: Bankruptcy Law
Satisfied Customers: 21
Experience: I have been a bankruptcy attorney since 1998 and have handled hundreds of bankruptcy cases successfully.
kicklaw40 and other Bankruptcy Law Specialists are ready to help you
Expert:  Roger replied 4 years ago.

Hi - my name is XXXXX XXXXX I'm a Bankruptcy litigation attorney here to assist you.

11 USC 548(a) says:

(1) The trustee may avoid any transfer (including any transfer to or for the benefit of an insider under an employment contract) of an interest of the debtor in property, or any obligation (including any obligation to or for the benefit of an insider under an employment contract) incurred by the debtor, that was made or incurred on or within 2 years before the date of the filing of the petition, if the debtor voluntarily or involuntarily-

(A) made such transfer or incurred such obligation with actual intent to hinder, delay, or defraud any entity to which the debtor was or became, on or after the date that such transfer was made or such obligation was incurred, indebted; or

(B)

(i) received less than a reasonably equivalent value in exchange for such transfer or obligation; and

(ii)(I) was insolvent on the date that such transfer was made or such obligation was incurred, or became insolvent as a result of such transfer or obligation;

(II) was engaged in business or a transaction, or was about to engage in business or a transaction, for which any property remaining with the debtor was an unreasonably small capital;

(III) intended to incur, or believed that the debtor would incur, debts that would be beyond the debtor's ability to pay as such debts matured; or

(IV) made such transfer to or for the benefit of an insider, or incurred such obligation to or for the benefit of an insider, under an employment contract and not in the ordinary course of business.

Thus, the trustee would have to be able to prove that you transferred this money with the specific intent to defraud the bankruptcy court of the money, which seems to be a long shot absent some solid proof to the contrary.