By:Michael A. Cibik
Even men with debt problems fall in love, and when they do, many of them will come up with a way to give their beloved a nice engagement ring. Often, heaven and earth will be moved in the search for the proper ring, and the result could be a very expensive engagement ring. If the gentleman happens to file chapter 7 bankruptcy before the wedding, this could spell trouble.
But how could this be? If the engagement ring was given to the fiancee prior to the man’s bankruptcy filing, it was no longer his property, right? And if it were no longer his property, how could he lose it in bankruptcy?
The answer to how the engagement ring could be lost to the bankruptcy trustee is found in section 548 of the bankruptcy code. Section 548 provides that if a bankruptcy debtor gives away money or property in the two years prior to filing bankruptcy, and if the bankruptcy debtor receives no actual value in return for the item given away, then the bankruptcy trustee can recover the money or property from the recipient.
It is common for a chapter 7 trustee to assert that the gift of an engagement ring to a fiancee in the two years prior to filing bankruptcy fits into section 548 very nicely. The trustee then demands that the fiancee return the engagement ring to the trustee to be sold to pay creditors.
Michael A. Cibik is a partner at the Philadelphia law firm of Cibik & Cataldo, P.C. He is one of the few attorneys in the Philadelphia area certified by the American Bankruptcy Board.
If you or someone you know is having financial problems, stop worrying and call Michael at (215) 735-1060 for a free consultation.
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