Sell asset before I file
January 27th, 2012 by Questions
Can I sell my second car before I file for bankruptcy. Would this look suspicious even if the profit went to overdue utility bills. Car is only worth 1000.
Posted from: Alberta
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January 27, 2012 at 11:06 am, Barton Goth - Goth & Company Inc. -Trustee in Bankruptcy said:
This is an interesting question. At any point prior to the filing of a bankruptcy you must be careful when it comes to liquidating property. If you are in a position where things must be sold simply to keep afloat what you need to do is make sure that:
1. You sell the vehicle for fair market value. This is vitally important because the legislation is designed to prevent people from selling assets that would have been lost in a bankruptcy to a friend for a good deal, all in an effort to prevent the creditors from benefiting for the presence of the asset (i.e. would rather have their friend get a good deal than the creditors see any recovery). So make sure the price is defensible (i.e. consistent with black book values, or even better sold by a professional auctioneer etc.).
2. Whatever purchases / bills are paid with the funds, keep your receipts. If these funds are used for essentials (i.e. food, rent, utilities etc.). The idea is the legislation is designed to prevent people from providing in-equal treatment to creditors (i.e. it would be inappropriate for you to sell the car and pay a debt owing to a family member, just because you felt bad) as the legislation is designed to treat al creditors in a fair and equal manner). So as long as you can demonstrate that no preference was made, the funds went entirely to necessary items, the you shouldn’t have any problems.
But be sure to discuss this with the trustee you will be using before you do it to ensure they are aware what will take place and are on board with this approach.