It is a myth that you can transfer assets to friends and family before filing for bankruptcy without any repercussion. The Bankruptcy law gives Bankruptcy Trustee the power to void or undo such transfers for the benefits of your unsecured creditors. This is known as the "Clawback" of Preferential or Fraudulent Transfer.
Payment or Transfer to creditors is considered Preferential if it is at least $600 total within 90 days before bankruptcy filing when a debtor is insolvent. It is a different analysis if the payment or transfer were in the ordinary course of business, which is one exception to the rule and will not be discussed here. A debtor is presumed insolvent 90 days prior to the filing of bankruptcy under 11 U.S.C. 547.
The Clawback period for Preferential Transfer is longer if the receiver is a friend, family or business partner aka "insider". Instead of 90 days, it is one year period with no specified value of transfer.
Making a payment to secured creditors like your auto loan or mortgage is not preferential transfer because a creditor is entitled to receive the value of its collateral under a Chapter 7 Bankruptcy liquidation up to the amount of the debt.
Preferential Transfer is different from Fraudulent Transfer. Preferential Transfer is treating one creditor better than your other creditors when the debtor is insolvent. In contrast, Fraudulent Transfer occurs when a person who is insolvent transfer asset to another without receiving reasonably equivalent value in return or with the intent to hide assets from creditors. For example, a debtor gave away a car valued over $50,000 for only $100 before filing for bankruptcy most likely with the intent to hide the car from creditors.
The Clawback period for Fraudulent transfer is 2 years. However, California Uniform Fraudulent Transfer Act provides for a longer period of 4 years under California Civil Code 3439.05, providing greater protection for unsecured creditors.
As a general rule do not transfer any assets before consulting Sacramento Bankruptcy Attorney Muoi Chea with additional Offices in Stockton and Fairfield, CA.