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Ellen, Attorney
Category: Business Law
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Experience:  25 years of experience helping people like you.
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I am affiliated with an new S corporation, the ...

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I am affiliated with an new S corporation, the previous owner of a dirt construction business, gifted my boss some pickups, reel trailer, a flat bed, ditch digger, some tools, etc. Then he said he filed bankruptcy. Some one tryed to pick up one of the reel trailers because they thought it still belonged to the previous owner, can they?
Submitted: 9 years ago.
Category: Business Law
Expert:  Ellen replied 9 years ago.

How long before the bankruptcy was the "gift" made? Is the previous owner related to your boss?
Customer: replied 9 years ago.
Reply to FLAandNYLawyer's Post: Jan. 1st these items were signed over and today they tryed to pick up one of the reel trailers they are not related and I don't have a date that he filed but he has just began to mention it in the last 3 weeks.
Expert:  Ellen replied 9 years ago.

You probably will not be able to keep the assets if the transfer to you is challenged in court. This is an extremely complex area. I will try to clarify the issues in a general manner.

Even if no bankruptcy was actually filed, creditors of the previous business may be able to avoid the transfers of the items gifted under the Uniform Fraudulent Transfer Act if either situation occurred:
1. (intentional) the debtor transferred assets with the intent to hinder, delay or defraud its creditors, or
2. (constructive) the debtor transfered assets for less than reasonably equivalent value while it was in financial straits (such as insolvency at the time of transfer, had unreasonably small capital as a result of the transfer, or incurred debts beyond its ability to repay by virtue of the transfer).

In California, under the Uniform Fraudulent Transfer Act, an intentional fraudulent transfer may be avoided up to one year after the transfer. Creditors need not establish that the debtor was in financial straits at the time of the transfer. In California, under the Uniform Fraudulent Transfer Act, a constructive fraudulent transfer may be avoided up to four years (and possibly seven years) after the transfer. The policy supporting the constructive fraudulent transfer is that a debtor may transfer assets for any value while it is financially healthy and paying its creditors. It is where the debtor is in financial straits and creditors will not be paid in full, may the transfer be attacked as one where the transfer did not yield fair value for the asset.

If a bankruptcy was filed, the bankruptcy trustee may be able to also avoid the transfers of the items gifted under Bankruptcy Code section 547 which provides that a transfer made by an insolvent debtor within 90 days of a bankruptcy filing (or, in the case of "insiders," such as persons in control or affiliated entities, one year) to a creditor that allows the creditor to receive more than it would receive had the transfer not been made and the debtor's assets liquidated in chapter 7.

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