Responsible, but still penalized?

August 3rd, 2009 by Questions

I noticed a post that mentioned asset sales and wondered this…

If one is attempting to avoid bankruptcy and can sell an item at the cost of what is left owing to pay off the debt of that item and it is a family member, work associate or friend that is interested and can afford to purchase this item, would they still be in danger of losing the item IF bankruptcy is unavoidable, regardless of our efforts? (I do not wish to add the loss of a relationship to the list of losses we are already considering.)

Obviously, the debt connected to the item sold would no longer exist, but would the sale of the asset be considered inappropriate still?

We have suffered a failed business and loss of wages due to an injury (5 months of reduced wages) and are trying to avoid bankruptcy or other options that may harm our long standing good credit rating.

By effectively selling off whatever we can to recover financially, could an action such as this affect us negatively if we fail to recoup enough to make our total debt managable again?

Thank you for your time, it is greatly appreciated,
Looking for a Ray of Light in Ontario

Posted from: Ontario


One Response to “Responsible, but still penalized?”

, A licensed trustee said:

I hope this clears things up for you…

If you have a car loan (for example) and you make arrangements to sell the car and pay off the loan before you file for bankruptcy (or a proposal) it is unlikely to cause you any problems in the bankruptcy. Just make sure you sell the car for its FAIR MARKET VALUE (FMV) or higher. The FMV is the amount a non-related person will pay you for the asset if you sold it to the public.

If you start selling things for less than their FMV, well that’s when you may get into trouble. For example, if you owned a clasic sports car and sold it to your brother for $500 the week before you filed and the car has a FMV of $25,000 there will be problems…

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