What If My Assets are Not All Exempt?

17 Sep What If My Assets are Not All Exempt?

The majority of Chapter 7 bankruptcies in most jurisdictions end up being no-asset cases. This means that all the debtor’s assets are exempt. In such a case there are no assets for the trustee to administer and distribute to creditors. An exempt asset is an asset that can be removed from a debtor’s estate under the law.

Most exemption laws limit the dollar value or quantity of an asset that is subject to exemption. Debtors in bankruptcy estates with assets above the exemption limit often think that their assets cannot be protected. This is not always the case.

When someone is considering filing and has significant non-exempt assets, it is the perfect time to talk to an experienced bankruptcy lawyer about some pre-petitionplanning. I haven’t yet met a potential client that was eager to turn their assets over to the trustee. There are a lot of ways to protect assets that non-lawyers may not consider; exemption laws can be complicated but an experienced lawyer may be able to find a way to protect an otherwise vulnerable asset. Many people are tempted to simply hide their assets in bankruptcy, but doing so is a crime.

What happens when the debtor has too much money? It may sound odd to someone not experienced in bankruptcy, but it happens more often than you would think. Many states have wildcard exemptions that can be used for cash on hand. Some states have generous limits while others are very small. For example, the Oregon wildcard exemption, applicable to an asset not otherwise exempt, is only $400. There are also exemptions that apply to certain types of accounts, for example IRA accounts are exempt up to $1,171,650 under 11 USC §522(n).

What you should do with any assets you can’t exempt is worth discussing with your attorney. There are different types of debt in bankruptcy, each treated a different way, some of which may be worth paying down before filing. Expenses can be prepaid in some circumstances, but what is ok varies from jurisdiction to jurisdiction.

Pre-petition bankruptcy planning is both an art and a science. Talk to an attorney. You may have more options than you think.

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I was admitted to practice in 1978. I am certified as a Consumer Bankruptcy Specialist by the American Board of Certification. I regularly speak on tax and bankruptcy issues at state, regional and national conferences. Years of experience in practice before the Internal Revenue Service and Oregon Department of Revenue have given me the background to resolve a large variety of consumer tax issues.
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