How asset protection plays into your pre-bankruptcy planning.

If your asset protection strategies have gone awry and bankruptcy looms, you need to consider you options. Regardless of the path you take when filing for bankruptcy, you need to strategically prepare for the process.

There are basically two kinds of debt, secured and unsecured.

Secured debt has been advanced to you, secured by the collateral that you have pledged. A creditor holding a security interest in your collateral has the right to take the property in the event that you default on your scheduled payments. If the collateral is now worth less that the outstanding debt, you may be personally liable for the deficiency.

Unsecured debt has been advanced to you without any collateral, only your personal promise to repay the loan. Most often unsecured debt is credit card debt although there are other forms such as student loans and installment loans. A creditor with unsecured debt has no recourse other than to sue you when you default and obtain a judgment against you.

If you decide to file for a liquidation bankruptcy, you will very likely have to sell many of your valuables. Careful preparation is the best way to proceed.

Preparation for filing

When you do sign the papers that will be used to support your bankruptcy filing, you will be making an oath that everything that you have listed is a truthful listing of your property. While you could lie about your assets, having given all of you personal property to your brother for safekeeping, courts have this thing about people lying to them. The word is perjury.

In all bankruptcy filings, you will have certain exemptions for property that cannot be taken to satisfy your creditors. The types and amounts of exemptions will vary from state to state, but you can expect to be left with enough assets to be able to have a fresh start. You should also avoid a rapid usage of credit cards immediately leading up to you filing; the court will frown upon this activity, considering it akin to theft.

The exemptions discussed above play into your pre-bankruptcy planning. While you are not allowed to hide and transfer assets, you may be able to sell certain items and use those funds to pay down some of the debt on your exempt property. For example you may decide to use liquid assets to pay toward the equity of a home. This will also play into the individual homestead exemption of the state in which you reside.

You will need to remember that everything you do for the previous year leading up to your filing is going to be scrutinized. If you mysteriously start to do things that are completely out of character, it will raise red flags. If you do anything that can be found to be a purposeful effort on your part to perpetuate fraud against any of your creditors, you can get into big trouble. Your possessions, while important to you, are not worth the repercussions of fraud.

Here are some commonly utilized transaction that many use prior to filing. You should of course seek legal counsel on all of you decisions to see if they comply with current bankruptcy law.

You can make your annual contribution to your IRA or to any other exempt pension plans. They are generally exempt from a filing.

Utilize your liquid assets to pay off debts that will not be dischargeable, such as taxes.

Pay down your mortgage on you personal residence, especially if you are in a state with an unlimited or significantly large homestead exemption.

You can take out a life insurance policy, which will be exempt.

At assetprotection101.com, we offer the latest news developments, strategies, resources and links relating to asset protection. Whether you a real estate developer, real estate owner or any business owner looking to better educate themselves on how to protect their assets, we're sure you'll find our site helpful in making a better decision about your financial future. You may even choose to receive our free monthly newsletter to keep you on top of the latest developments in asset protection.
 

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