Things to avoid

Over the years I have seen some people do some lots of things to try to avoid bankruptcy.  Some of the things they try are, I think, really bad decisions.

For instance, sometimes people borrow against, or withdraw from, their 401(k) account or other retirement account in order to keep up payments on their credit cards.  The cash keeps them afloat for a while, but then it runs out and they wind up filing bankruptcy anyway.  The sad part is that a 401(k) or other retirement account is protected from creditors, so they have "wasted" money that was protected.  (As with lots of legal issues, there are some exceptions to the protection.), 

Sometimes people give stuff away to a friend to try to protect it.  This is a terrible idea.  If you give something valuable to a friend you have created a "fraudulent transfer" or a "voidable transfer".  The trustee can go to the person to whom you gave it and get it back from them.  And because it was a voluntary transfer, you can no longer exempt it.

Many of the things that people own can be protected in bankruptcy.  So, just like tapping your 401(k) plan, giving something away means it cannot be protected any longer.

This does not mean that you cannot sell surplus items.  If you sell to a third party, no one will think that you made a gift.  The trustee may well ask you what you did with the money.  It is a bad idea to say "I don't remember!"  On the other hand, if you sell to your brother, a trustee may wonder if you sold something for much less than it was worth -- in effect, making a gift.  And if so, the trustee will try to reverse the gift.

There are a lot of nuances -- that's why I will do a no-charge meeting with you to gather facts and try to figure out your next step(s).   Call me at 320-252-4473 to set up a time to meet, by Zoom, by phone, or in person.