Bankruptcy can play a role in asset protection planning but only when you have an attorney to help walk you through this. Bankruptcy, unfortunately, may be increasingly necessary for a company or an individual that is facing financial troubles. In fact, more than 2 million companies and individuals file bankruptcy on a yearly basis. Bankruptcy has an important role in protecting assets as well as in eliminating debts. Many debtors will use bankruptcy to protect their wealth in a downturned economy. Many consumers are overburdened with credit card debts, which means bankruptcy as a tool for asset protection planning has increased in recent years. Bankruptcy is not always the right answer for any person overburdened with financial challenges but it can be the right choice when a person has too many debts to be paid from selling their assets or from their future income. Bankruptcy can be valuable for protecting your assets because all civil actions against you must immediately stop when you file for bankruptcy.
This includes seizures, lawsuits, IRS claims, attachments, foreclosures, repossessions and levies. This is because every creditor has a legal responsibility to observe the automatic stay of legal action imposed by bankruptcy. Bankruptcy, therefore, gives you the chance to resolve your financial issues with creditors who might otherwise sell your assets or seize them. The timing of bankruptcy is critical as far as how it protects your assets.
Debtors often file too late or too soon and either way, lose out on critical benefits and advantages of bankruptcy. Collecting all tax refunds before you file are recommended. Any tax refunds that are due to you at the time you filed bankruptcy will be claimed by your trustee. You will want to consult with an experienced bankruptcy lawyer as well as an asset protection planning lawyer to clarify that you have addressed all of the most common issues and that the timing of bankruptcy is appropriate right now. If you are concerned about how to proceed, reach out to a team of professionals who can help you.
Your estate planning lawyer should also be included in these conversations.