Legal Question in Bankruptcy in Wisconsin

Pre-Bankruptcy Planning, Moving Funds into Education Account (529), Preferential Transfers, Fraudulent Conveyances

I am unable to advise you without representing you and first researching your specific situation. However, as a general matter, pre-bankruptcy planning, i.e., transforming non-exempt assets into exempt ones, is perilous territory. It should therefore be attempted only under the supervision of an experienced bankruptcy attorney who has had prior experience as a bankruptcy trustee. While such transfers are allowed to a limited extent, there is plenty of case law finding exceptionally greedy "planning" transfers of money or assets to exempt accounts (such as IRA�s in some states), to be assailable by the trustee. The asset or money in question therefore becomes subject to seizure by the trustee if the exemption is not upheld by the judge. Generally speaking, any transfer to an unrelated party can be undone by the trustee as a "preferential transfer" for a period of 90 days. Transfers benefiting a related party, however (including to yourself or to your son), can be automatically undone by the trustee for up to one year. Transfers which are an attempt to frustrate creditors (aka "fraudulent conveyances") can be attacked for even longer periods. Outrageous or unreported transfers can even amount to a criminal violation of bankruptcy fraud laws which are investigated by the FBI and U.S. Trustee�s office (both agencies of U.S. Department of Justice). I do not want to frighten anyone into failing to take full advantage of lawful exemptions or to avoid pre-bankruptcy planning. It is a lawful tool when properly done, which is intended to allow the bankruptcy debtor to have a "fresh start" after the bankruptcy case is closed under long recognized law. ( It even rises to the level of a constitutional right under the �bankruptcy clause� of the constitution.) However, the case law frowns upon debtors who use these tools to the point of greed in order to instead obtain a "head start" rather than a simple �fresh start� following bankruptcy. You should therefore be careful doing this and consult with an expert in advance of making any such transfers.