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Old 01-29-2011, 11:46 AM   Topic Starter
El Jefe El Jefe is offline
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Business Law question.
Here is a hypothetical scenario.

Jason decided to declare bankruptcy because he owed his creditor's over $50,000. His only asset was a car worth about $20,000, so he decided to protect the car by selling it to his friend Deni$e for $3000. He planned upon buying the car back from Deni$e when the bankruptcy proceedings were finalized. Was the sale of the car a valid contract? Why or why not?

I think the sale of the car was not a valid contract, because the car is his only asset and in bankruptcy the assets and contracts of a bankrupt person are assigned to a trustee in bankruptcy who is empowered to sell these assests for the benefit of the creditors.

Is this correct?
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Old 01-29-2011, 11:47 AM   #2
El Jefe El Jefe is offline
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What the deuce did a make love not war icon come up for?
Last edited by El Jefe; 01-29-2011 at 11:47 AM.. Reason: NM I fixed it.
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Old 01-29-2011, 11:51 AM   #3
MIAdragon MIAdragon is offline
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I don't think so, unless he specifically used the car as collateral on his loan.
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Old 01-29-2011, 12:03 PM   #4
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If he sold the car before he declared bankruptcy, I think it is a valid contract. That said, I don't really have a clue about any of this.
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Old 01-29-2011, 12:07 PM   #5
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This sale is known as a fraudulent transfer. He has sold his car anticipating bankrupcy and intends to buy it back afterward. If his creditors can establish these facts in court, they can pull the car back into his pool of assets.

Google "fraudulent transefer" and "debtor/creditor" and you should get some basic rundowns on this area of law.
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Old 01-29-2011, 12:09 PM   #6
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Originally Posted by JohnnyV13 View Post
This sale is known as a fraudulent transfer. He has sold his car anticipating bankrupcy and intends to buy it back afterward. If his creditors can establish these facts in court, they can pull the car back into his pool of assets.

Google "fraudulent transefer" and "debtor/creditor" and you should get some basic rundowns on this area of law.
Yep
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Old 01-29-2011, 12:14 PM   #7
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Old 01-29-2011, 12:17 PM   #8
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Most bankruptcy codes have a "look back period" that would hold this as a sham transaction and an attempt to evade creditors.

According to the Federal Code,

§ 548. Fraudulent transfers and obligations

(a)
(1) The trustee may avoid any transfer (including any transfer to or for the benefit of an insider under an employment contract) of an interest of the debtor in property, or any obligation (including any obligation to or for the benefit of an insider under an employment contract) incurred by the debtor, that was made or incurred on or within 2 years before the date of the filing of the petition, if the debtor voluntarily or involuntarily—
(A) made such transfer or incurred such obligation with actual intent to hinder, delay, or defraud any entity to which the debtor was or became, on or after the date that such transfer was made or such obligation was incurred, indebted; or
(B)
(i) received less than a reasonably equivalent value in exchange for such transfer or obligation; and

It can also invalidate your whole bankruptcy:

http://www.law.cornell.edu/uscode/ht...7----000-.html

TITLE 11 > CHAPTER 7 > SUBCHAPTER II > § 727
Prev | Next
§ 727. Discharge
How Current is This?
(a) The court shall grant the debtor a discharge, unless—
(1) the debtor is not an individual;
(2) the debtor, with intent to hinder, delay, or defraud a creditor or an officer of the estate charged with custody of property under this title, has transferred, removed, destroyed, mutilated, or concealed, or has permitted to be transferred, removed, destroyed, mutilated, or concealed—
(A) property of the debtor, within one year before the date of the filing of the petition; or
(B) property of the estate, after the date of the filing of the petition;
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Old 01-29-2011, 12:43 PM   #9
El Jefe El Jefe is offline
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Man I love this place, thanks everybody for the help. The fraudulent transfer was a very interesting point, and to be honest I hadn't even looked into that avenue. REP to everyone who helped me learn something!
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Old 01-29-2011, 01:05 PM   #10
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Old 01-29-2011, 01:07 PM   #11
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Business Law question.
You've clearly gone full reerun...
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Old 01-29-2011, 01:15 PM   #12
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I never seen the name Deni$e spelled that way before.
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Old 01-29-2011, 01:15 PM   #13
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Why would someone with a $20k car declare bankruptcy over $50k?

That doesn't seem logical, IMO.
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Old 01-29-2011, 06:16 PM   #14
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Originally Posted by DaneMcCloud View Post
Why would someone with a $20k car declare bankruptcy over $50k?

That doesn't seem logical, IMO.
Well, you do realize we're dealing with CP retarts ?
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Old 01-29-2011, 10:50 PM   #15
El Jefe El Jefe is offline
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Originally Posted by Rausch View Post
You've clearly gone full reerun...
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Originally Posted by Fairplay View Post
I never seen the name Deni$e spelled that way before.
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Originally Posted by DaneMcCloud View Post
Why would someone with a $20k car declare bankruptcy over $50k?

That doesn't seem logical, IMO.
Let me clear up a couple things, when I said business law question, I meant its a question for my Business Law class. It's a hypothetical question, we are supposed to answer using principle of law. It's just a discussion question to invoke some thinking. I just wanted to get some feedback on it. I spelled deni$e because if I spelled it regularly it put up that annoying icon.
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