Gifted a used Mercedes prior to filing

[keeshkeesh]

Hello Everyone,

First let me say that all though I have been a lurker, this messageboard has been an amazing source of information that money can't buy.

I received a 2001 Mercedes with 145,000 miles for my birthday a few months ago that is now registered and insured in my name. I am wondering if this will be an issue when I file my chapter 7? Do they check that deep into motor vehicle records? The purchase price was $2500 (even though the blue book says $7500). I am at the end of my finance agreement for a 2003 Mitsubishi (2 more months left). I definetly plan on filing by the end of July but I was just wondering if this "asset" is at risk to be liquidated?

Thanks in advance.

[backtoschool]

The trustee usually does a title record as part of discovery. Transferred titles are "low hanging fruit" to turn non-asset cases into asset cases.

If the transfer was to you by a family member and/or was below market value (which it was) then the trustee will contest the asset and go after you or the person who gifted you the car for the difference between blue book value and what you actually paid for the car. In either case, the car needs to be exempted as an asset. If you exempt the car for $7,500 (ie if you have a wildcard and car exemption that will cover that) then the trustee may not go after the person who sold you the car at below market value. But trustees are trained to look for "fraudulent" transfers. (this is just a bankruptcy term to mean that the transfer occurred between family members in the last two years and/or was below market value)

There is a good chance that the trustee will go after either you or the person who sold you the car at under market value and will try to recover the 5k difference.

[BKDefender]

Whoah there... A fraudulent transfer has nothing to do with receiving a gift or receiving something worth more than you paid, it only has to do with transferring something and not receiving fair market value in return.

Had the Mercedes been worth $2,500 and Keeskeesh paying $7,500 then yes - she gave away net $5k cash to someone that looks like it was intended to defraud creditors.
But because Keeshkeesh received $7,500 in exchange for only $2500, it's great for the trustee - he now has more assets to try to take. The goal of the fraudulent transfer power is to ensure people don't start giving their stuff away to friends and family to try to keep the bankruptcy trustee, and their creditors, from getting it. Just about everyone would give $2k to their sisters before they'd give it to their creditors if that were the only two choices.

KeeshKeesh - You need to look long and hard at your state's exemptions to see if you can exempt both cars or the KBB and/or NADA value of both cars. If you cannot, see if your jurisdiction allows you to sell one of them and use the money for regular expenses and/or transferring into a Roth IRA to save it. Here in Nevada we can do the latter - sell a 2nd car and put up to $5k of it into a Roth IRA, use the rest to pay your attorney, pay your light bill/gas bill/water bill/car note/etc 2-3 weeks early, and generally use it to stock-up on food/groceries/etc that you might need. Some jurisdictions don't like you doing that.

--William