While most people understand that bankruptcy may extinguish many types of unsecured financial obligations or permit a debtor to repay debts through a 3 or 5 year payment plan, the value of bankruptcy as an asset protection tool is often ignored. One reason many debtors do not consider the value of bankruptcy as an asset protection tool is because they are confused about the concept of a Chapter 7 “liquidation bankruptcy”. At the South Florida bankruptcy law firm of Klein of Eric N. Klein and Associates, our experienced team handles many Chapter 7 bankruptcies where debtors keep all of their property.
This type of bankruptcy, referred to as a “no asset 7” or “no asset Chapter 7,” often involve many assets, but they are protected by the bankruptcy exemption system. While in many states debtors filing Chapter 7 can make a choice between the federal and state exemptions systems, you must choose the Florida exemption system when filing in this state. Many times property may qualify under multiple exemptions so artful use of the exemption system is important to avoid leaving property unprotected that could have otherwise been exempted with more skillful use of the Florida bankruptcy exemption system. When a debtor emerges from a Chapter 7 or successful Chapter 13 bankruptcy following a discharge, the property that may have been vulnerable to creditors prior to bankruptcy is no longer in jeopardy.
Another asset protection aspect of bankruptcy involves pre-bankruptcy planning. While simply giving away or transferring assets to avoid exposing them to the jurisdiction of the bankruptcy trustee may constitute a fraudulent transfer, this does not mean that an experienced South Florida bankruptcy attorney cannot assist you with asset protection. Our Boca Raton bankruptcy attorneys may analyze your assets and determine that certain assets cannot be protected by exemptions. One solution may be to convert that asset into another type of asset that may be protected by a Florida bankruptcy exemption.
While converting assets from non-exempt assets into exempt assets can be an effective tool for protecting your property in bankruptcy, it must be undertaken carefully. The bankruptcy trustee may reverse a preferential transfer to a creditor if it is made close in time to the bankruptcy filing. The trustee may unwind a transaction that is considered a preferential transfer within 3 months of bankruptcy if the other party is an insider or within one year for non-insiders. An example of a preferential transfer might include paying back a debt owed to one’s parents by transferring real estate to them. The trustee may also look back two-years for fraudulent transfers that are intended to shield money from creditors. The key is that the process of converting assets prior to filing bankruptcy is not the type of activity that can be done safely without the legal advise of an experienced South Florida bankruptcy attorney. If you are considering filing bankruptcy or are struggling with overwhelming debt, the experienced Boca Raton bankruptcy team at Eric N. Klein and Associates, P.A. may be able to help. We invite you to call us today to schedule your free initial consultation at 561-353-2800.
