I have four acres of land that is in a separate state from that in which my home is located. Will that land be exempt in Chapter 7 bankruptcy? If not, can I sell it to a relative for $1 prior to filing for bankruptcy?
-- Shawn
A.
What is exempt in a bankruptcy proceeding is a matter of what exemptions are available. Exemptions are the only place that the substantive law of bankruptcy is different from state to state.
A sale for a dollar is a bad idea. First of all, it is undoubtedly a fraudulent transfer, since the land is worth more than a dollar. You have transferred something without getting reasonably equivalent value, leaving less for your creditors.
A bankruptcy trustee can sue the recipient of a fraudulent transfer to recover the asset so its value can be shared among all creditors.
Worse, a transfer intended to put your assets beyond the reach of your creditors might cost you your bankruptcy discharge.
Sit down with an experienced bankruptcy lawyer to consider how to protect your assets with exemptions or consider filing a Chapter 13 where you keep all of your assets through a reorganization plan.
