Bankruptcy Law Question

[deacfan78]

My brother in law is filing bankruptcy. He has a classic car that he sold to his brother 7 or 8 months ago supposedly for FMV. I have read online that the bankruptcy trustee will probably look into that sale and could revoke it if they decide it was fraudulant, but if he did receive FMV, he may be OK. Also, the car is actually in my garage because the brother in law filing bankruptcy still had the car in his posession but wanted it out of his house and the other brother in law who "owns" the car now lives an hour away and doesn't have room for it. Would my wife and I be liable for housing the car if the trustee determines the sale was fraudulant and wants the car?

ETA: This is local to North Carolina if that matters

 

[lurkerdeac]

No liability for holding the car. Hiding it from the trustee? Maybe, but that's not what you've got.

 

[cville deac]

It's not a fraudulent or less than value transfer if your brother got fair market value. Not uncommon to see this type of stuff in bankruptcy. People are going down and they sell off their stuff to try to keep going and then file when they can't. If the car was sold for approximately what it was worth, the trustee won't seek to have it avoided. But (s)he will want to know what your brother did with the proceeds. So if it was a car worth $7K, say, and sold for that amount 9 months before the filing, your brother will likely be asked to produce bank statements to show where that $$ went. Assuming he was just living off of it because he wasn't making enough to pay his monthly living expenses, then no problem - no sale avoided or request for turnover of sale proceeds. OTOH, if that same sale occurred 5 weeks before the filing, and your brother can't account for the proceeds, he may have a serious problem on his hands - worst case scenario is case could be referred to the US Trustee for a denial of discharge. Now let's say that several months before the bk filing your brother sold that same car worth $7K to a family member for $2K. In that case, the trustee can try to set aside the sale, but is going to more interested in settling the matter for either your brother or his family member throwing a few thou the trustee's way.

Oh, and if asked by the trustee to turn it over, you and your wife will simply say, "Yes sir/maam, where would you like it delivered"? Not a good idea to start doing funny things with property items on the eve of filing bk.

 

[deacfan78]

I was told he got FMV, but I don't really know and don't care. I looked up the last tax bill and it shows 7K tax value, but the car is worth way more than that. I don't know if he has a junk title or what or how any of that works. His plan in all this is to pay his brother back and get the car back after the smoke clears which I think is shady. The bankruptcy will be a small business and personal bankruptcy.

Just glad I'm in the clear. I didn't want it at our house anyway because the whole thing to me is sketchy.

 

[TheTwinAndreBen]

The 'preference period' during which a trustee can look back and/or undo certain transaction is 90 days before filing for 3rd party, arms length transactions and a year before filing for 'insider' or family transfers, so your bro in law to bro transaction is insider and reviewable by trustee. You really dont have any liability for having it at your house unless the court tells you to turn it over and you dont.