Tips and Tricks to Shield Your Assets During Bankruptcy

December 29, 2011

Tips and Tricks to Shield Your Assets During Bankruptcy

One of the most common concerns people have before they file for bankruptcy protection is the possibility of losing their home or other important assets. People often fear losing their retirement accounts, their car(s) or their savings for a child's college education.

However, people file bankruptcy to get a fresh start and put them on the road to financial recovery -- a goal best accomplished by allowing individuals to keep property to live a functional, normal life. As a result, many assets are protected during the bankruptcy process, and with qualified bankruptcy advice, individuals and businesses can plan to save non-protected assets as well.

Chapter 7 and Chapter 13 Bankruptcy

According to the U.S. Bankruptcy Court, the two most common forms of bankruptcy are Chapter 7 (1.5 million filings in 2010) and Chapter 13 (420,000 filings in 2010). During a Chapter 7 bankruptcy, debtors in California use state property exemptions to protect certain assets from creditors. For example, people can typically protect the following types of assets during a bankruptcy:
-Pensions, 401(k) accounts and other retirement savings
-Social Security or unemployment compensation
-Cars, checking and savings accounts, and tools needed for one's profession (all up to certain limits)
-Limited amounts of home equity

Given these exemptions, it is possible to plan ahead and shield certain assets from creditors during a bankruptcy. For example, if you are going to file for bankruptcy, you should discuss your assets with a bankruptcy attorney so he or she can evaluate your different assets and confirm whether those assets will be protected during the bankruptcy process. With this information, you will be better informed about the bankruptcy process before you file.

For this reason, it is important to speak with a qualified bankruptcy attorney before considering transferring assets prior to a bankruptcy. A bankruptcy court may look at transfers that occur shortly before a bankruptcy filing to evaluate whether those transfers were made to defraud creditors. If a bankruptcy judge finds that to be the case, then the bankruptcy trustee may attempt to claw back those transfers and return them to the bankruptcy estate.

Finally, some individuals will qualify for Chapter 13 bankruptcy. Unlike Chapter 7, a Chapter 13 debtor does not liquidate property to repay his or her creditors, but rather establishes a three-year to five-year repayment plan. Debtors must show they have enough disposable income to abide by this plan, but upon completion of the plan, all of the remaining dischargeable debt is eliminated and the debtor is allowed to keep their property.

Anyone considering bankruptcy should speak with an experienced bankruptcy lawyer immediately to discuss options for protecting property, as well as eligibility for either Chapter 7 or Chapter 13 bankruptcy.

Article provided by The Law Offices of Michael H. Raichelson
Visit us at http://www.cabkattorney.com