A bankruptcy trustee can recover assets transferred within one year of the bankruptcy filing where the debtor did not get reasonably equivalent value for the asset, or where the transfer was made with intent to hinder creditors.
Preferences are transfers of a debtor's property to a creditor for payment of a prior debt. Under the Bankruptcy Code, "preferences" are transfers of property of the debtor, which are avoidable or reversible if they are:
Preference avoidances by bankruptcy trustees are designed to prevent creditors from gaining an advantage over other creditors.
A trustee or a debtor in possession has "avoiding" powers, which may be used to cancel a transfer of money or property made during a certain period of time prior to the filing of the bankruptcy petition. This "avoidance" of a particular transfer by a trustee, may force the return of the payments or property transferred, for the benefit of all creditors. The power to avoid transfers is effective against transfers made within 90 days prior to the bankruptcy filing. If the transfer involved insiders such as relatives, partners, or officers of the debtor, the trustee or debtor in possession may "avoid" or cancel such transfers if they were made up to on year prior to filing for bankruptcy.
Bankruptcy is designed to provide a solution for honest debtors to obtain debt relief and a fresh financial start. The bankruptcy system requires that all debtors be honest and forthright throughout the entire process. A bankruptcy crime can be construed as many different offenses, some of which may include:
Bankruptcy fraud carries a sentence of up to five years in prison, or a fine of up to $250,000, or both under federal law.
Chapter 12 bankruptcy is designed specifically for the reorganization of family farms. It is closely modeled after Chapter 13; however, it has a higher debt ceiling. It is only available to persons who meet the definition of "family farmer" which may be an individual, partnership, or corporation. The plan must provide for total repayment of the unsecured debt, or the debtor must agree to contribute all of his disposable income to the payment of these debts. If the plan does not provide for full repayment of unsecured claims, the debtor must agree to contribute his or her entire disposable income to the payment of this debt during the term of the plan.
Income tax debts may be eligible for discharge under either Chapter 7 or Chapter 13 of the Bankruptcy Code. Chapter 13 provides a payment plan to repay some debts, with the remainder of debts discharged. Chapter 7 provides for full discharge of allowable debts if they meet the following criteria:
Before a Chapter 7 or Chapter 12 bankruptcy can be granted, the petitioner is required to prove that the four previous tax returns have been filed with the IRS. They are required to provide a copy of their most recent tax return to the bankruptcy court.