Can You Sell Your Possessions Before Bankruptcy?
Many people in financial trouble do their best to scrape by until its too late. Sometimes, this involves working extra jobs, making late payments, or even selling some of their personal belongings. Whether this is the right thing to do will depend on your particular situation, but sometimes such activity can have a negative effect once you file for bankruptcy.
In some situations, you can sell your possessions before you file for bankruptcy, and avoid losing that possession. However, there are several limitations on transactions that occur prior to a bankruptcy filing.
First, that transaction must occur for fair market value, and cannot give advantages to some creditors over others. So, this means you cannot sell your stuff to a creditor for half-price, or to your uncle for $1. But if the purchase is fair, and does not disadvantage one creditor in favor of another, you may be able to do so without any problems in bankruptcy.
Second, once you sell your possessions you have the proceeds, and what you do with those proceeds is limited as well. For instance, you cannot use those proceeds to pay one creditor and not another, because that is considered unfair. Additionally, you should not keep that cash, because you are permitted only a certain amount of cash in hand once you file for bankruptcy ($150). Anything over this amount will be confiscated by the court to pay creditors.
Instead, put that money toward exempt items, such as your home payments, or stocked food. If you have questions about your options in bankruptcy, contact an experienced and qualified bankruptcy attorney to learn more.