Avoid This Costly Mistake: Property Transfer Before Bankruptcy

Fradulent transfer and quitclaim deed John thought he was being clever. He was deep in debt, and bankruptcy was inevitable. So, he signed a quit claim deed, transferring ownership of his Brooklyn brownstone to his brother—for free. No paperwork, no sale, no cash exchanged. Problem solved, right?

Wrong.

What John didn’t know is that his property transfer before bankruptcy triggered a legal landmine—one that could cost him everything.

🚨 What’s So Risky About Transferring Property Before Bankruptcy?

If you’re planning to file bankruptcy in New York, and you’re thinking about giving away or “selling” your real estate to family for $1, you’re in dangerous territory. Here’s why:

The law sees it as fraud if you don’t get fair market value in return.
There’s a 4-year lookback period in NY under the Debtor & Creditor Law.
Bankruptcy trustees are trained to hunt for these red flags—and they will.

📜 What Is a Fraudulent Transfer?

A fraudulent transfer is when someone moves assets—like real estate—to another person without receiving equivalent value, and often right before filing bankruptcy. This is seen as an attempt to dodge creditors, and the bankruptcy court doesn’t take kindly to it.

Key signs of a fraudulent transfer:

🚩 Red Flag	🧨 Why It’s a Problem
No payment or undervalued sale	Trustee assumes it was to hide assets
Family member or insider is recipient	Seen as suspicious relationship
Transfer occurred within 4 years	Still within legal reach for reversal

⚖️ What Happens in Chapter 7?

In Chapter 7 bankruptcy, the trustee’s job is to gather your non-exempt assets and sell them to repay creditors. If you’ve transferred your home within the lookback period:

The trustee can reverse the deed, take the home from your relative, and sell it.
Even if the family member didn’t know it was wrong, it doesn’t matter.
You could lose your discharge or face legal action.

This is real. This happens often.

💰 What Happens in Chapter 13?

In Chapter 13 bankruptcy, you keep your property but pay debts through a court-approved plan. If the trustee finds you gave away a home before filing:

You’ll likely have to repay the value of that home as part of your plan.
That means if your house was worth $200,000 and you transferred it, you might be on the hook to pay that amount over 3–5 years.
Not doing so could get your case dismissed.

🧠 Why People Make This Mistake

People think they’re protecting their home from creditors. In reality, they’re setting themselves up for even bigger losses. The bankruptcy system is built to detect these moves—and reverse them when necessary.

📌 Real Estate Transfers Are the #1 Target

Trustees focus heavily on real estate transfers because property is often the most valuable asset. If you’ve transferred any of the following, it’s a red flag:

House or condo
Co-op or inherited property
Vacant land or investment property

🛡️ What Should You Do Instead?

📞 Call our office at 212-244-2882 before you act.
Don’t rush to “fix” things by transferring your property. We’ll help you:

Understand your actual risk
Protect what you can legally
Avoid actions that could ruin your case

📞 Final Word: Let’s Talk Before It’s Too Late

Before you sign that deed or try to shift your property “out of reach,” call/text The Law Office of William Waldner at (212) 244-2882 or email us at info@midtownbankruptcy.com. We’ll guide you on what’s legal, what’s not, and how to move forward without risking your fresh start. Don’t make a costly mistake—call us first.