Can the trustee in my bankruptcy filing take back assets that had been transferred before filing?

In some situations, the trustee can undo transfers you made before filing for bankruptcy. The trustee will do this if your transfer was fraudulent or qualifies as a preference, in which you paid off a preferred creditor before your bankruptcy case. 

Fraudulent Transfers

A fraudulent transfer takes place when you transfer property or money to someone else in order to shield it from your creditors. If, for example, you sign your car over to your brother or transfer the contents of your savings account to a friend before filing for bankruptcy, the trustee can take that money or property back into your bankruptcy estate. And, if the trustee believes you made the transfer with the intent to cheat your creditors, it might jeopardize your whole bankruptcy case. 

Preferential Transfers

A preferential transfer (also called a preference) happens when you pay off a creditor before filing for bankruptcy. The trustee can undo a preference to an insider (a friend, family member, or close business associate) if you made it within a year of your bankruptcy case and it involved at least $600. For preferences to arms-length creditors, the trustee can undo a payment if it took place in the three months before you filed and involved at least $5,475. 

Talk to a Lawyer

The purpose of these rules is to prevent bankruptcy filers from protecting assets that should go to their creditors -- or, in the case of preferences, from picking and choosing which creditors get repaid and which don't. Filers who violate these rules face very serious consequences. If you're in this kind of trouble, you may want to consult with a lawyer. Better yet, if you're contemplating transfering property before you file for bankruptcy, talk to a lawyer before you make any moves that could come back to haunt you.