One of the most common questions or myths or misconceptions that I hear, from potential clients, revolves around selling some of their assets before filing for bankruptcy. There is no rule or law that prevents a debtor from selling some of his or her goods prior to filing for bankruptcy, whether it is a chapter 7 or a chapter 13, in South Florida. The law comes into play when the bankruptcy court looks at what you sold, who you sold it to, and what value you got.
What You Sold and What Value You Received
Prior to filing for bankruptcy you can sell whatever you want, so there is no issue as to what you sold. The issue that comes up is what value you did you receive for what you sold. If you sold your gold watch for $50.00 when the fair market value was $5,000.00 then the court is going to have an issue with you and an issue with the person who purchased your watch. Your best option is to determine what the fair market value of the item you want to sell is, and then sell it for as close to that price as you can. Typically you can look on ebay or craigslist to determine values for some items. If you have jewelry or a vehicle then you may need to go to a jewelry store, pawn shop, or a car broker.
Who You Sold it to
Whether you sell your goods to a stranger, a neighbor, or your family member will make a difference on how the bankruptcy trustee reviews your sale. Items sold to family members or friends will be scrutinized in detail by the bankruptcy trustee, as they probably believe you are giving the family member or friend a “great deal.”
Record Keeping
Keep all records of the item, where it was listed, the sale amount, and who it was sold to. You will need to disclose all this information to your bankruptcy attorney who will disclose it on your bankruptcy petition.
Proceeds
Ok so now you sold the item or items, what are you going to do with the money? You either need to spend it or keep it and disclose the amount you are holding. The proceeds of the sold items are considered an asset and assets are a critical part of bankruptcy planning.
If you are thinking of filing for bankruptcy in South Florida (Broward, Palm Beach, or Miami-Dade County) then please give our office a call to schedule a free consultation.