A gift vs. a transfer

[redyhws]

I gifted my parents a large sum of money about 6 months ago. The money was gifted to help my parents with business expenses they incurred. It was not done with the intent to defraud any creditors, and in fact, my main creditor (which is prompting my bankruptcy filing) did not have a claim until after this gift occurred.

My question is that on the Statement of Financial Affairs, there are 2 questions: The first is about gifts made within the last year and the second is about the transfer of other property made within the last 2 years. If I wait until a year has lapsed since making this gift, do I have to still list it as a transfer made within 2 years? My goal is to not create a situation where the trustee sues my parents to get the money back. I can wait 6 months to file, but I am not sure I can wait 2 years.

[frogger]

This could look ugly no matter how long you wait..........

[Dannmcg357]

I thought a Gift is a onetime transfer of money. Transfer of property is not the same thing, that would be real estate, vehicles, and valuables

[redyhws]

Based on my research, a "gift" to family and friends is a form of "preference" payment. Nothing in the code references the word "gift". Therefore, the rules regarding the 1-year look back for a gift to family member are the same rules governing preference payments to family members (which allows the trustee to void such payment if it was made within the year before filing).

The problem is that the statement of financial affairs asks you to disclose transfers made within 2 years of filing, regardless of whether they were fraudulent. This is presumably so the trustee can inquire about them and then decide whether the relevant bankruptcy code provisions kick in to try to void them. You know if you list the gift, the trustee is going to bend over backwards to mischaracterize it as a "fraudulent transfer" so he has a right to go after it (which has a 2-year look back period).

[backtoschool]

I gifted my parents a large sum of money about 6 months ago. The money was gifted to help my parents with business expenses they incurred. It was not done with the intent to defraud any creditors, and in fact, my main creditor (which is prompting my bankruptcy filing) did not have a claim until after this gift occurred.

My question is that on the Statement of Financial Affairs, there are 2 questions: The first is about gifts made within the last year and the second is about the transfer of other property made within the last 2 years. If I wait until a year has lapsed since making this gift, do I have to still list it as a transfer made within 2 years? My goal is to not create a situation where the trustee sues my parents to get the money back. I can wait 6 months to file, but I am not sure I can wait 2 years.

I was made an asset case by gifting my mother two $500 checks last year. Anything over $600 to an insider can be deemed by the trustee as a "fraudulent conveyance" of a cash asset, and turn you into an asset case. The trustee will go after your parents for the money.

[redyhws]

I was made an asset case by gifting my mother two $500 checks last year. Anything over $600 to an insider can be deemed by the trustee as a "fraudulent conveyance" of a cash asset, and turn you into an asset case. The trustee will go after your parents for the money.

If there is an argument that the money was transferred to your mother as a fraudulent conveyance, then the look-back is 2 years. If it was a gift, the look-back is 1 year. However, that is the problem with the question on the STatement of Financial Affairs: it asks about all transfers made within last 2 years (which presumably includes gifts). So, if you gifted money to someone over a year before you filed, you still have to disclose it under the "other property transfer" question, and the trustee will then try to argue it really wasn't a "gift", but was a fraudulent transfer.

So, you dispute it to the judge, and I guess let him decide.

[backtoschool]

If there is an argument that the money was transferred to your mother as a fraudulent conveyance, then the look-back is 2 years. If it was a gift, the look-back is 1 year. However, that is the problem with the question on the STatement of Financial Affairs: it asks about all transfers made within last 2 years (which presumably includes gifts). So, if you gifted money to someone over a year before you filed, you still have to disclose it under the "other property transfer" question, and the trustee will then try to argue it really wasn't a "gift", but was a fraudulent transfer.

So, you dispute it to the judge, and I guess let him decide.

I agree with your post redyhws. The look back period is two years for property, but many trustee's include cash gifts in the two year look back as well.

In my case, I could have contested it with the bankruptcy judge and probably won, but I was able to discharge $150k of unsecured debt for $1,000, which is a great fresh start in my opinon. . (I paid the trustee the $1,000. I was not going to have my mother pay it which would have defeated the purpose of giving it to her in the first place....)

[redyhws]

I agree with your post redyhws. The look back period is two years for property, but many trustee's include cash gifts in the two year look back as well.

In my case, I could have contested it with the bankruptcy judge and probably won, but I was able to discharge $150k of unsecured debt for $1,000, which is a great fresh start in my opinon. . (I paid the trustee the $1,000. I was not going to have my mother pay it which would have defeated the purpose of giving it to her in the first place....)

My problem is that my gifts were +$20,000. They truly were gifts to help my parents out with their business because of their illnesses. That being said, it will still look bad, and the trustee would argue they were fraudulent transfers until he was blue in the face. I think it is a no-winner.

[Meatstick]

My wife has sent money to her parents back in the Philippines but not on a monthly basis. The money that was sent was used for everyday living expenses and late last summer when MIL was hospitalized. Per my lawyer he said the TT more than likely will not have an issue and even IF he does he would have to go after her parents in the Philippines and its just not worth the hassle.


I am more interested to see what the TT has to say about my large $13k+ tax refund. We did as instructed by our lawyer and spent it down on allowable items,$4000 for braces an example. We shall see how it all plays out.

[LimpDisc]

I would think the only way to be sure is to wait 2 years before filing. How large of gift are we talking about? Do you have the option of doing what backtoschool did with her trustee?

I wouldn't be to confident going before the judge thinking that i'd win that decision.

[LimpDisc]

Nevermind. You answered the question as I was typing my response.

A gift over $20,000 within that 2 year time frame will be an easy target for the trustee. IMO

[redyhws]

Question 7 on the SOFA asks about gifts made within 1 year. Then Question 10 says: "List all other property, other than property transferred in the ordinary course of the business or financial affairs of the debtor, transferred either absolutely or as security within two years immediately preceding the commencement of this case."

The key words are "List all other property", which implies that this question is inquiring about property not already previously inquired about on the SOFA. So, you could list "none" on this question, since the question about gifts was previously asked.

Bottom line is I am trying to find a way to not tell the trustee about this and not be accused of lying on the SOFA. But, it is risky. Not sure the trustee could ever know about it (since they only look at the last 4 months worth of bank statements), but it still scares me if I don't disclose it.

[backtoschool]

My problem is that my gifts were +$20,000. They truly were gifts to help my parents out with their business because of their illnesses. That being said, it will still look bad, and the trustee would argue they were fraudulent transfers until he was blue in the face. I think it is a no-winner.

The panel trustees are trained to look for gifts and fraudulent conveyances. I think you will definitely be flagged by the trustee for this. Usually the trustee will try to claim the whole amount and then settle and also allow payment arrangements. In my situation, the trustee wanted to make sure he got something out of me, and that was all he could find to claim. I had done my homework before filing.

In my opinion you have two options.

1. You can wait two years to file from the time you gave the money to your parents.

2. You can file anyway, and strike a deal with the trustee for half ($10k) or so and make payment arrangements. Your case will discharge but be open until you pay the full amount off and the trustee files his final report and then pays your creditors.

I think the trustee will settle with you for a portion of the 20k (probably half, but I am guessing...). I don't know if you can handle paying that off, and how much of a burden that would be versus waiting two years to file.

[backtoschool]

Question 7 on the SOFA asks about gifts made within 1 year. Then Question 10 says: "List all other property, other than property transferred in the ordinary course of the business or financial affairs of the debtor, transferred either absolutely or as security within two years immediately preceding the commencement of this case."

The key words are "List all other property", which implies that this question is inquiring about property not already previously inquired about on the SOFA. So, you could list "none" on this question, since the question about gifts was previously asked.

Bottom line is I am trying to find a way to not tell the trustee about this and not be accused of lying on the SOFA. But, it is risky. Not sure the trustee could ever know about it (since they only look at the last 4 months worth of bank statements), but it still scares me if I don't disclose it.

Don't even think of going there. The trustee will be looking at bank account statements, etc and will see the transfer anyway. I had to provide a year of bank account statements. Some people have to provide two years worth if the US Trustee gets involved. Some only have to provide six months worth, but why take that risk? Not listing the transfer would be fraud and could get your case dismissed. (and is also a crime)

[backtoschool]

My wife has sent money to her parents back in the Philippines but not on a monthly basis. The money that was sent was used for everyday living expenses and late last summer when MIL was hospitalized. Per my lawyer he said the TT more than likely will not have an issue and even IF he does he would have to go after her parents in the Philippines and its just not worth the hassle.


I am more interested to see what the TT has to say about my large $13k+ tax refund. We did as instructed by our lawyer and spent it down on allowable items,$4000 for braces an example. We shall see how it all plays out.

If you spent your tax refund before you filed on allowable expenses, then you should be fine.

Any money sent to your in-laws regardless of where they live, can be clawed back if it is within the two year period, and is over $600 total.