A lot of questions come up at initial consultations from clients about what to do with property in order not to lose it in a bankruptcy case. Typically, if you are transferring property on the eve on filing a bankruptcy case your actions are too late. If you disclose everything to your attorney before filing bankruptcy, he or she should be able to perform prebankruptcy planning to maximize your exemptions and protect your property.
Prebankruptcy planning usually entails turning unprotected property into exempt property in order to keep it out of the hands of the bankruptcy trustee. The type of property in question and the timing of your actions before filing bankruptcy will determine if your property will be liquidated for the benefit of your creditors.
If you are financing a new car or purchasing a house you want to make sure you wait 90 days from the date the lien is placed on the auto title or from when the mortgage is recorded. The Bankruptcy Court looks at preferential transfers/payments made to creditors within 90 days before filing bankruptcy. If you get a new car today and file bankruptcy within 90 days the trustee can void the lien and liquidate the car for the benefit of your creditors. This also comes up when obtaining a mortgage or refinancing your home. Careful planning before filing bankruptcy can mean the different between losing your new asset or keeping it.
Another preplanning tool is funding exempt assets with non-exempt property. This usually comes up when a client has a good amount of money in a bank account that is at risk of being turned over to the Trustee. If the client would fund his/her retirement account with the non-exempt funds before filing bankruptcy the money in the retirement is 100% protected. You might lose the immediate use of the funds since they are now stored in a retirement account, but you save the funds in order to have access to them for another day.