RSS FeedSince the main goal of this blog is to provide bankruptcy information in Indiana, whenever a blog reader poses a question I think will be of general interest, I want to be sure I include my answer in a blog post. It’s interesting that this particular reader is asking about 
“lookback” on assets in bankruptcy.
“Lookback” is a technical term, the type I and the Bloomington, Anderson, and Columbus bankruptcy lawyers who work in the Mark Zuckerberg bankruptcy law offices might use. But even we bankruptcy attorneys in Indiana would use that term only infrequently.
I say that because lookback generally doesn’t apply to bankruptcy, with one very important exception. The court generally bases its rulings on assets the debtor owns as of the date of filing bankruptcy.
The one big exception is this: if assets were transferred within the two years leading up to a bankruptcy in Indiana, that facts need to be disclosed to the court. Put another way, the court can “look back” two years to discover whether there were any fraudulent transfers of assets that might have been used to satisfy creditors. If the sale or transfer of any asset is judged by the court to have been solely for the purpose of keeping that asset outside the “bankruptcy estate”, the bankruptcy trustee has the power to do any or all of three things:
a) Cancel the sale and bring that asset back in to the bankruptcy estate so that it can be sold by the trustee, with the proceeds used to repay debt
b) Deny the bankruptcy petition altogether, dismissing the case.
c) Charge fines or even levy a prison sentence. (Bankruptcy fraud is a felony. Fines can be as much as $500,000, and, in the worst of cases, prison sentences of up to five years can be declared.
As a debt consolidation lawyer and Indianapolis bankruptcy lawyer for more than twenty years, a very large part of my work involves helping people prepare for the Creditors’ Meeting, which is one of the important steps in the bankruptcy process.
At this meeting, the bankruptcy trustee will generally ask the debtor four kinds of questions:
- Questions about the reasons for filing bankruptcy
- Questions about the assets listed on the paperwork submitted to the Court
- Questions about whether, within the two years before filing, any assets were transferred (given or sold) to family or friends. This is where “lookback” applies.
- Questions about whether any money is expected to be coming in (tax refund, inheritance, sweepstakes money already won, or accident settlement)
One other way in which the term “lookback” applies to bankruptcy has to do with cash advances on credit cards. If, within the 70 days leading up to when a bankruptcy case is filed, the debtor took cash advances of more than $750, (with money now gone and the debtor asking to have that debt discharged), that is considered to be nondischargeable debt.
So, while in general, the bankruptcy court makes its judgments based on assets owned as of the date of the filing, the court is allowed to “look back” to find fraudulent transfers that happened in the months and years preceding that date.
As I continue to offer bankruptcy services in Indiana, I often need to remind my Indiana bankruptcy clients and blog readers that the bankruptcy system is in place to offer responsible and honest individuals and business owners a chance to recover from financial setbacks too big to handle without help. But, for the system to work, creditors need to be treated fairly as well.
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