I’m a creditor in a bankruptcy case, and the debtor appears to have given some of his assets to relatives in order to keep them away from his creditors. What can I do?

debtor-give-property-to-realtive-for-shelter consumer bankruptcy

I’m a creditor in a bankruptcy case, and the debtor appears to have given some of his assets to relatives in order to keep them away from his creditors. What can I do?

First, you can make the trustee aware of the situation. The debtor is required to disclose transfers of property made within the previous year on a form called the Statement of Financial Affairs. If the debtor did not do so, the judge might dismiss the case. In any event, this type of transfer is called a fraudulent transfer. The Bankruptcy Code gives the trustee the power to avoid transfers made within 2 years of the bankruptcy if the debtor made the transfer with the intent to hinder creditors, got little or nothing in return for the property, was insolvent when he made the transfer, or made the transfer to a business associate or a relative, among other reasons. The trustee can also sue to recover the property under state law.
Second, if the trustee declines to pursue the property, you could try to recover the property yourself under state law. Because the property is technically an asset of the bankruptcy estate, you would need to file a motion to lift the automatic stay in order to file suit in state court. You will probably also want an order abandoning any claim in the property to you. Otherwise whatever property you collected would have to be shared with the other creditors. While you could get a bigger share for doing the work, it still might not be worth the effort.

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