When filing for bankruptcy, the biggest concern on everyone’s mind is what will happen to their assets. The bankruptcy process requires that you contribute to paying your debts, which may mean that you may have to liquidate some of your assets as a part of the process. Fortunately, there are ways to protect certain assets so that you don’t lose everything. Read on to find out from the team at Kain + Henehan how you can protect your assets during bankruptcy in Saint Cloud.
What Happens To Assets During Bankruptcy
What happens to your assets during bankruptcy largely depends on the type of bankruptcy that you file. Your assets are evaluated by the court to see what can be done to either protect them or liquidate them to pay debts. From there, any asset that is to be liquidated is given to a trust under the care of a court-appointed trustee whose job it is to sell those assets for as much as possible. Any money from those sales contributes to paying your debts.
Some of Your Assets Are Automatically Protected
Under Minnesota and federal law, the equity of some of your assets is automatically protected from liquidation in bankruptcy. It’s important to note that you are only exempt on the value of the equity, not the value of the item itself. Some of the most used exemptions include:
- Equity is real estate up to $27,000
- Equity in your primary vehicle up to $4,450
- Equity in work-related tools and resources up to $2,800
- Equity in jewelry up to $1,875
- Wedding rings and family heirlooms up to $3,000
- Life insurance up to $$14,875 (cash payout only)
- The full value of pensions and retirement-based assets
- Access to payments from retirement assets from your ex-spouse
Protect Your Assets Ahead of Time
There are a few things that you can do to protect your assets before bankruptcy even becomes something that you need to consider. Here are a few options.
Insurance
Take out an insurance policy that can help you pay off your debts on certain assets. The type of insurance you need changes based on your situation, but an umbrella plan can offer protection from things like lawsuits and help you pay off the legal costs so that you don’t have to file for bankruptcy.
Incorporate or Create a Trust
If you pass your assets to another entity, then that entity owns the assets. That means those assets are not considered in your bankruptcy. Turning your business into an LLC, for example, removes you from much of the liability of its operations and separates your assets from the business’s assets. If you file for bankruptcy but the personal assets that you use are owned by an LLC, then they are not a part of the bankruptcy proceedings.
The same is true of a trust, which creates a separate entity to own and manage assets. The difficulty in this is that you need to do it significantly before you file for bankruptcy, and you cannot take ownership of the assets again in many situations. The trust owns the assets, and you either need to manage the trust or hire someone to manage it for you.
Discuss How to Protect Your Assets With A Bankruptcy Attorney
If you are in a situation where you are considering filing for bankruptcy, it’s important to discuss your case with a bankruptcy attorney to protect your assets. The legal process is complex and having the right help on your side means you can get a much better outcome. Contact Kain + Henehan by calling (612) 438-8006 or completing the online form. Let us help you get started on the bankruptcy process the right way.
