When a person makes the decision to transfer property to another party, this is called a voluntary transfer. In this article, we’ll define the term “voluntary transfer” and explain how it applies to bankruptcy law. 

Key Takeaways

• A voluntary transfer is the transfer of property between two parties under the will and control of the transferring party without compensation, obligations, agreements, or contracts
• In bankruptcy, a voluntary transfer is the transfer of a debtor’s property with his or her consent
• When a debtor transfers property in order to keep it out of their bankruptcy estate, it is called a fraudulent transfer
• The bankruptcy court may void fraudulent transfers and order the property to be returned

What Is a Voluntary Transfer?

A voluntary transfer is the transfer of property by one party to another without any compensation, obligations, agreements, or contracts. It happens with the will and control of the transferring party. The party that transfers the property is called the donor and the one who receives the property is called the donee.

Examples of involuntary transfers include:

• Transfers following a divorce
• Transfers following death
• Transfers following bankruptcy

Examples of voluntary transfers include:

• Transfers between existing members of an LLC
• Transfers to a third party

Voluntary Transfers in Bankruptcy

In bankruptcy, a transfer is when a debtor sells or gives their property to another party before or during the bankruptcy proceeding. A voluntary transfer is the transfer of a bankrupt debtor’s property with the debtor’s consent. 

When a person files for bankruptcy, they sometimes decide to transfer property beforehand in order to not have to turn it over to their bankruptcy estate to be sold off. If a debtor does this, it is called a fraudulent transfer and it is not allowed. If the bankruptcy court discovers that a debtor made a fraudulent transfer, they can render the transfer void and order the property to be returned.