Question: When a person gives money to child for a donpayment months before the bankruptcy is filed whywould they have to suffer and pay this back to the trustee. It was a gift not knowing bankruptcy was in the future for themselves. Now I may never get out from under because of this. Is this fair?
Answer: For many people, insolvency is a process whereby a persons finances get worse and worse over time. For most this involves a period of years. The test is not wether you knew you were going to go bankrupt but wether you ought to have know you were or would be unable to pay your bills.
Depending on the timing of the gift and your date of bankruptcy gifts to friends or relatives are presumed to be an attempt to compromise your creditors interests and spirit money away. Gifts to children months prior to a bankruptcy fall into this category of presumption. The rules were put into place because people were gifting money to family members that they couldn’t afford to gift and then going bankrupt. The fairness of the legislation, as do most rules depend on your perspective.