Oklahoma Bankruptcy HelpCan I Sell My Car Before Filing for Bankruptcy in Tulsa

You may want to know if you can sell your car before filing for bankruptcy. After all, it’s your car, and your bills make it difficult to make ends meet. Selling your car right before filing for bankruptcy is considered a prefiling transfer of property and those types of transfers often attract the attention of the bankruptcy trustee and court. That is because your assets can be used by the bankruptcy court to pay off your creditors when you file for Chapter 7 liquidation under federal bankruptcy laws. Intentionally selling a vehicle just prior to filing for bankruptcy may be permitted in some cases, and in others, not.

There are times that you may choose not to sell your car even when it is allowed. When in doubt, it is best to consult with your local Tulsa bankruptcy attorney to determine if it is ok to sell your car before filing.

Bankruptcy Exemptions: One Vehicle

You are allowed to keep certain property even when filing for bankruptcy. You may keep one car, valued at $7,500 or less if it is already paid for. What happens if you have two cars that you own outright? In some cases, you may wish to sell the second vehicle to help pay fees and costs associated with the bankruptcy itself.

If the car you intend to sell would have been exempt under the law, then often, the Trustee will not object to a prefiling sale as long as the sale was to a bona fide purchaser for a bona fide purchase amount. Most of the time, the purchase amount should reflect an amount close to the bluebook value for the vehicle.

Selling Non-Exempt Property

A second car would not be considered to be exempt under bankruptcy laws. Any sale of non-exempt property before filing for bankruptcy will be examined more closely by the Trustee. Selling nonexempt property, such as a second car, can get risky in the eyes of the court.

It may be permissible to do so as long as you are not hiding the asset or trying to defraud the court. It is not permissible to sell the car to a friend in a strawman sort of deal with the expectation that you can retrieve the car after the bankruptcy is completed. It must be a bona fide sale. Any sale that looks like it was made to a friend or relative or with a minimal sale price will raise the court’s suspicion of attempted fraud.

Other Factors Considered by the Court

The court may also consider how those funds were spent. If you sell your vehicle immediately prior to filing for bankruptcy, the Trustee will likely want to know what was done with the proceeds. If the proceeds went toward necessary expenses, such as living expenses or the costs of filing for bankruptcy, the court may look more favorably upon the transaction. If the proceeds were used for a vacation, the court may not look favorably upon the transaction. Likewise, the court will suspect fraud if the proceeds are used to purchase other exempt property. In essence, the court will try to determine your intent in making the sale.

Finally, the sale and its proceeds must be fully disclosed. If you fail to disclose the transfer, the court will suspect fraud.

Free Consultation With a Tulsa Bankruptcy Attorney

Financial Freedom Bankruptcy Lawyers of Tulsa offers free consultations to help debt-burdened Oklahomans discover the best approach to their financial crisis.  Call us at (918) 786-9600 to start your free consultation today. You may also contact us using the contact form button on this page to ask a professional bankruptcy attorney in Tulsa your personal questions.