Troublesome Bankruptcy Clients and Troublesome Transfers

Bankruptcy is a complex judicial process and quite often even a seasoned attorney has to face very deceptive and often times stubborn clients. Okay, I have transferred all the money and it is in the form of cash and I have saved it. What can you answer to them? Of course, it is troublesome to tell your prospective bankruptcy clients that the recent transfers they have made are illegal and deceptive and violates the bankruptcy laws. How can you convince them? When the answer is always the same, “I don’t have it any more”. Of course, you don’t have it, but you recently transferred it. In another situation, they still have some money on their credit cards left, and want to use that money before they file bankruptcy. How can they be convinced that this is not equivalent to the money in their bank account and it is not their money?
For instance, a transfer of property on the eve of filing bankruptcy is unlawful and illegal. Section 727 of the Bankruptcy Code says that a transfer of property for no purpose other than to frustrate the intent of creditors within a year prior to filing is considered a fraudulent transfer and would prevent such a filer from receiving a discharge.
Another type of troublesome transfer can arise when an elderly parent attempts to transfer assets to an adult child in an effort to qualify for Medicaid. This is writing on the wall. Again, the grandmother had given money for the grand kids and it is in the bank account of mother who is about to file bankruptcy. Okay, this is the money came from grandma. No matter what, it is in your account at this time, and it is non-exempt, unless you want to surrender it. Quite often, we give free advice, but the free spirit from free advice are eaten up if the client does not listen, and not ready to act on a validly provided advice.


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