Why Giving Assets to Family Members 12 Months Before Filing is a Major Risk
Sept. 9, 2026
Transferring assets to a family member before filing bankruptcy can create serious legal problems—and the risk does not always end after 12 months. Repaying a family member who is also a creditor may be challenged as a preferential transfer if the payment was made within one year before filing.
Gifts and other transfers can raise separate fraudulent-transfer issues that may reach even further back. What you transferred, why you transferred it, when you did it, and whether you received anything in return can affect how the transaction is treated.
When you are struggling with debt, it is understandable to want to protect your family or make sure someone close to you does not lose something important. But transferring money or property before bankruptcy can create problems you may not expect, including putting the family member who received the asset at risk.
At Swindell & Associates, PC in Amarillo, Texas, we can review your financial situation and any transfers you have made or are considering. Our attorneys can explain how those transactions may affect your bankruptcy options and help you address potential problems before filing. Contact us today to discuss your situation.
Repaying a Family Member Can Be a Preferential Transfer
A preferential transfer generally involves paying a creditor on an existing debt. Under federal bankruptcy law, a trustee can generally challenge a qualifying transfer to or for the benefit of a creditor made within 90 days before filing. If the creditor is an insider, including certain relatives, the lookback period extends to one year.
Among other requirements, the transfer must have been made while you were insolvent, within the applicable lookback period, and must have allowed the creditor to receive more than they would have received in a Chapter 7 case. Federal law presumes the debtor was insolvent during the 90 days immediately before filing, but that presumption does not extend throughout the full one-year insider period.
For example, suppose you borrowed $10,000 from your brother and repaid the entire loan six months before filing bankruptcy. If your brother would have received only $500 on his claim in a Chapter 7 case, the trustee may be able to challenge the $10,000 payment as a preference.
This can be surprising because you may have simply wanted to repay a legitimate debt. The issue is not necessarily whether you acted dishonestly. Preference rules are designed to prevent one creditor from receiving a better payout shortly before bankruptcy than they would have received in the bankruptcy process.
Gifts Can Raise Fraudulent-Transfer Issues
Giving property to a relative is different from repaying a family member who is a creditor. A gift generally is not a preferential transfer because you are not paying an existing debt. However, that does not mean the transfer is automatically safe.
A gift or below-market transfer can raise a different issue: whether you improperly transferred property away from your creditors. Federal bankruptcy law allows a trustee to challenge certain transfers made within two years before bankruptcy when the debtor received less than reasonably equivalent value under specified circumstances or transferred property with the intent to hinder, delay, or defraud creditors.
Texas law also allows certain transfers to be challenged under Business & Commerce Code Chapter 24. When determining whether a transfer was made with fraudulent intent, a court may consider factors such as whether:
The recipient was an insider, such as a family member
You continued to possess or control the property after transferring it
The transfer was concealed
You were facing or anticipating a lawsuit
The transfer involved a significant portion of your assets
You were insolvent or became insolvent after the transfer
For example, giving your daughter a paid-off vehicle, transferring savings to your parents, or signing over valuable property to a sibling can raise different concerns from repaying a family loan. The family relationship alone does not make the transfer improper, but the circumstances surrounding it matter.
A Trustee May Recover Assets From Family Members
If a trustee successfully avoids a transfer under the applicable bankruptcy rules, the trustee may be able to recover the transferred property or its value from the person who received it, subject to applicable defenses and limitations. Texas law also allows certain fraudulent transfers to be undone and, in some circumstances, permits recovery of the asset's value.
That means a transaction intended to help your family member could ultimately create a problem for that person. Your relative may have to return the property or face a claim for its value, depending on the type of transfer and the applicable law.
We can review the transfer, consider when and why it occurred, and assess how it could affect your potential bankruptcy filing. If there is a potential issue, we can explain your options and help you understand what steps may be appropriate before you file.
Past Transfers Should Be Disclosed Before Filing
If you have already transferred money or property to a family member, disclose the transfer before filing for bankruptcy. The circumstances surrounding the transfer can affect how it is treated in your bankruptcy case. This can include:
Repaying a loan from a relative
Giving money or valuable property to a family member
Transferring real estate or a vehicle
Selling property to a relative for less than its fair value
Forgiving a debt owed to you
Putting property in a relative's name while continuing to use or control it
At our law firm, we may need to know when the transfer occurred, what the property was worth, whether you received anything in return, why you made the transfer, and your financial circumstances at the time. Do not assume that transferring the asset back will fix the problem. A second transfer creates another transaction that we may also need to evaluate.
Talk to Our Bankruptcy Attorneys Before You Make a Move
Transferring assets to family before filing for bankruptcy may seem like a way to protect someone you care about, but it can create problems for both you and the recipient. Before you give away property, repay a family debt, sign over a title, or transfer money, get legal advice about how the transaction could affect your bankruptcy case.
At Swindell & Associates, PC, our Chapter 7 bankruptcy attorneys can review your circumstances, explain the potential risks, and help you understand your options before you file. Located in Amarillo, Texas, we serve clients throughout Amarillo and the Texas Panhandle, including Borger, Pampa, Hereford, and Dumas. If you are considering bankruptcy and have transferred, or are considering transferring, assets to a family member, contact us to schedule a consultation.