If you file for Chapter 7 or Chapter 13 bankruptcy, you must complete forms that disclose your income, expenses, debt, and the types of real property (real estate) and personal property you own. One of the forms is called the Statement of Financial Affairs for Individuals Filing for Bankruptcy.

On this form (which you may find and complete on the uscourts.gov website) you will list financial transactions you made up to ten years before you filed for bankruptcy. The bankruptcy trustee will review these transactions and may undo a sale, gift, or transfer of property the trustee determines should be used to pay your creditors. Sales, gifts, debt payments, and transfers of property to your friends and family members are known as insider payments, and will receive the most scrutiny.

In North Carolina, as in all states, when filing for Chapter 7 or Chapter 13 bankruptcy, debtors are required to complete and submit various forms that provide a detailed account of their financial situation. One of these forms is the Statement of Financial Affairs for Individuals Filing for Bankruptcy, which is available on the uscourts.gov website. This form requires the disclosure of significant financial transactions made in the period leading up to the bankruptcy filing, potentially going back as far as ten years. The bankruptcy trustee assigned to the case will examine these transactions to identify any that may be considered preferential or fraudulent, such as sales, gifts, or transfers of property to insiders like friends and family. If the trustee determines that certain transactions were made to hinder, delay, or defraud creditors, they have the authority to potentially reverse those transactions to recover assets for the benefit of the creditors. This process is designed to ensure equitable treatment of all creditors and to prevent the abuse of the bankruptcy system.