Expert: Terry Leeders - 4/3/2008

Question
My husband worked for an unincorporated business. He was owed $7500. To pay of some of the debt, the employer signed over the title of a vehicle to my husband. By signed agreement, this reduced the debt to $4000. A few weeks after signing over the vehicle, the employer declared Chapter 7 bankruptcy. Now we are being told that we may have to give the vehicle back, and we will not see any payment of $4000. Is this true? Do we have any recourse?

Answer
Unfortunately, transfers just before a bankruptcy can be undone, so that the asset can be liquidated and distributed to all creditors.  Once the trustee issues an asset report, your husband will receive a proof of claim to send in, stating how much was owed when the case was filed.  The trustee will then distribute the assets based on priority as set out in the bankruptcy code.  You may want to talk to a local attorney to help protect his interests.