Fast Eddie tells you that he thinks he has everything worked out. Eddie owes over $50,000 to debtor, and while he owns practically no assets, he does have a baseball card collection worth $100,000. Eddie tells you that he plans on giving his baseball card collection as a gift to his cousin on Sunday, and then file for bankruptcy on Monday. Eddie tells you, "That way those creditors will get practically nothin'! Ha!" Is Eddie right? Is there a provision of the Bankruptcy Code that might dash Eddie's plan?
What will be an ideal response?
The Bankruptcy Code gives the bankruptcy court the power to void certain fraudulent transfers of a debtor's property made by the debtor within two years prior to filing a petition for bankruptcy. These are gifts or transfers of property to insiders (e.g., relatives) or to noninsiders with the intent to hinder, delay, or defraud a creditor. The bankruptcy court in Eddie's case could very likely find that the gift of the baseball cards to his cousin constituted a fraudulent transfer, in which case the transfer will be voided.
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