Recession Prep: How to Protect Your Assets When Filing for Bankruptcy
Current economic trends could be an indication of upcoming financial struggles for families across the nation. Unfortunately, some people might need to turn to bankruptcy as a fresh start after financial difficulty.
When bankruptcy is on the horizon, you might assume that you will lose all personal property so the creditors can be paid. The truth is that your interests can be protected in the bankruptcy process. You need to be sure that you are working with an experienced legal team that can support you in exploring available options. Your assets can be protected, but it takes a bit of planning and expertise.
Comparing Options: Chapter 7 vs. Chapter 13
The outcome depends on the way the bankruptcy is filed:
· Chapter 7: With Chapter 7 bankruptcy, it is possible that your nonexempt assets are “liquidated.” This means that the items are seized and sold. Then the proceeds are used to pay the creditors, based on the priority level determined through the bankruptcy proceedings.
· Chapter 13: You can often keep your assets with this type of bankruptcy. It is often called a “reorganization bankruptcy.” The assets aren’t sold, but you are required to follow a court-mandated repayment plan.
With both types of bankruptcy, exemptions can be filed – making these assets untouchable to creditors. Examples of common exemptions include home equity, vehicle equity, furniture, retirement accounts, and jewelry. When handled right, bankruptcy can be an effective solution that helps you maintain your car and home, with a built-in repayment plan that works for your financial situation.
Protecting Assets in Bankruptcy
Also, consider other asset protection strategies that can be used before you choose to file for bankruptcy. For example, you might choose asset conversion strategies, such as using liquid assets to pay down your mortgage, take out a life insurance policy, or purchase household necessities.
Less common asset-protection strategies might include equity reduction or asset protection trusts.
Personalized Bankruptcy Advice
Every bankruptcy situation is unique, which is why it is essential to get personalized advice from a trusted attorney. Choosing a legal team with bankruptcy experience gives you the peace of mind in knowing that you can avoid common mistakes made in bankruptcy.
If you need bankruptcy assistance, then Miles & Hatcher, LLP is here to help. Contact our team to learn more about available services. We’re happy to schedule a free consultation to discuss your needs: (909) 481-4080.