In North Carolina, can assets, such as house, car, etc., be transferred to a spouse's name prior to filing Chapter 7 bankruptcy? If so, could creditors come after the spouse?
1 Answer from Attorneys
Of course a transfer be made, however it would be a mistake to transfer without fair value in exchange within 4 years of filing a bankruptcy because the trustee in bankruptcy could avoid the transfer and take the property to sell and distribute the money to creditors. The transfer also eliminates the exemption which could have been taken. A creditor could also sue to avoid a transfer made for less than fair value and done with the intent to defraud creditors or at a time the debtor was insolvent. Technically the creditor is suing you to reach the property and would name the spouse or whoever took title because the interest would be taken, not to take judgment against the spouse or other transferee. It is rare that a creditor would do it, but it is common for a trustee, in bankruptcy, to sue and avoid the transfer.
In a bankruptcy, a debtor can exempt property he holds free and clear that meets the exemption limits. Thus you must list the property, keep it in your name and the code allows you to retain it. Exemptions include up to $35,000 equity in real estate you use as your home, $5,000 in household goods, $5,000 of the unused real estate exemption (wildcard), $3,500 equity in an automobile and an unlimited amount in qualified retirement accounts. You are permitted to rearrange your property to maximize exemptions. Say you had $10,000 in cash and had not contributed to an IRA for the year; you could contribute up to the maximum, say $5,000 and shelter it from the trustee, then exempt the other $5,000 under the wild card exemption. You should consult a lawyer prior to any transfer or rearrangement if you contemplate bankruptcy.