How long should I wait to file for bankruptcy after selling assets?

Rules on selling assets before bankruptcy vary by state and by situation, but in general, federal law (as well as the majority of state laws) dictate that you should avoid selling off major assets for a year prior to a bankruptcy filing. This applies only to chapter 7 bankruptcies, as chapter 13 bankruptcies do not result in the liquidation of assets in order to pay creditors that are the main point of chapter 7 filings.

Many people have difficulty with this year restriction, because of the fact that many people attempt selling their assets as a way to avoid bankruptcy, and then end up having to file anyhow. In a situation like this, it is probably feasible to prove to the court that your asset sales were not an attempt to commit fraud or protect your assets from liquidation. This is why the rule of not selling assets a year before a bankruptcy filing is not a hard and fast rule.

You should keep in mind that the value of assets sold will play a part in this: for example, if you sell your $2000 car as a last-ditch effort to pay off some bills and avoid bankruptcy, but it is not enough to make much of a dent in your debts, filing for bankruptcy promptly afterward is likely not going to raise any eyebrows or red flags. Selling a $20,000 car may be a different story. As in any other situation, a good bankruptcy lawyer is key, and being honest about your actions is essential.