Clients often ask our lawyers if they can transfer valuable property to friends and relatives right before filing bankruptcy and not list it on their bankruptcy papers. This question has a simple answer, which is probably the answer you expected—you cannot. The bankruptcy code requires that all gifts and other transfers of property for the previous 2 years be listed in your bankruptcy papers, which you must sign under penalty of perjury. Knowingly failing to list a property transaction in your bankruptcy papers is a felony. In addition, if the bankruptcy court finds that you defrauded your creditors in connection with your bankruptcy case, it can refuse to discharge any or all debts in your case. In other words, transferring property to friends or relatives (or anyone else) for the purpose of concealing it from your creditors is a very bad idea.
In contrast, a completely legal way to retain most property in connection with your bankruptcy case is to claim it as exempt and list it in your bankruptcy papers. In our professional opinion, much of the property that clients are sometimes tempted to conceal can be legally claimed as exempt under one of the state or federal exemption rules, and therefore, can be saved in a completely legal manner.
In summary, concealing transfers of property prior to your bankruptcy case is illegal and a very bad idea. However, most personal property can generally be claimed as legally exempt in a bankruptcy case, and this is a legal, ethical, and smart method to retain your personal property after bankruptcy.
