Ways to Protect Your Assets during Bankruptcy
If you’re facing bankruptcy, it’s important that you first take the time to properly plan what will happen after you file. While declaring bankruptcy is a simple process, failing to plan or use proper foresight can make your personal assets susceptible to seizure and liquidation in order to pay your debts. So, if you think bankruptcy may be in your future, here’s what you can do to protect many of your assets.
File a Chapter 13 Bankruptcy
If you qualify for this type of bankruptcy, filing a chapter 13 is one of the easiest ways to protect your assets from liquidation. In most cases, a chapter 13 bankruptcy will allow you to keep all of your property. However, if you file a chapter 7 bankruptcy, you may be facing asset liquidation. So, be sure to talk to someone at a bankruptcy law firm to determine if a chapter 13 bankruptcy is a viable option for your financial situation. If not, keep reading to learn a few other steps you can take to protect assets, even during a chapter 7 bankruptcy.
First, it’s important that you know which assets are typically exempt from liquidation during a bankruptcy. Generally, the following types of assets are fully protected:
· Household goods and furnishings
· Most retirement accounts
· Pensions and profit-sharing plans
· Social Security payments
Your home also has certain protections, but depending on the state you’re in, you may sacrifice the equity in your primary residence during a chapter 7 bankruptcy.
Asset Protection Trusts
You can also protect your assets using a trust in some states—and you don’t need to be a resident of the state to have one of these trusts. The trust must be run by an independent trustee who controls all distributions. The trust must also include spendthrift and irrevocability clauses.
You may also be able to protect some assets by reducing the equity you have in them. This is most effective with real property and can be done by financially encumbering the property in some way. You must be able to prove that you’re taking the encumbrance for a legitimate purpose. It’s also best if this encumbrance is taken more than a year before filing for bankruptcy or you risk having it voided. A bankruptcy lawyer can provide you with more information on reducing equity of your property.
This is another potential way to protect your assets that must be done well in advance of filing for bankruptcy. Transferring assets after filing for bankruptcy is considered fraud, and the trustee handling your chapter 7 filing may even be able to void any transfers made up to one year before your filing. If you’re found to be committing fraudulent transfers, the trustee can not only void those transfers, but can move to have your bankruptcy filing denied and refuse to discharge your debts.
However, when done properly, transferring nonexempt assets to others can protect those assets from liquidation so that they can be returned to you at a later date. Please work with a bankruptcy lawyer in Mattoon, IL, to ensure that these are handled in a correct, legal manner.
If you’re facing bankruptcy and are worried about protecting your assets, contact the Law Offices of Winter-Black & Baker. We’ll advise you on how to handle your bankruptcy filing to protect the most assets possible from liquidation.