One of your main concerns when you file for bankruptcy is probably whether or not you will lose your property. Bankruptcy exemptions are one way that you can save your home, car, and other assets. With some planning ahead, you may be able to save even more property through the available exemptions. But then there is a fine line between being prepared and committing actions that could get you accused of fraud. Read on to learn about the smart way to approach bankruptcy.
Federal Exemptions vs. State Exemptions
Federal law contains its own bankruptcy exemptions, and every state has its own unique set of exemptions. In some states, you may be able to choose between local laws and federal laws, but in most states, you will have to stick with the state's laws. But if you should reside in a place that lets you decide, then you should compare both exemptions systems to which would benefit you more.
Recent Relocation to Another State
Have you moved to a different state in the past two years? This usually means you will have to go by your last state's exemption system. Perhaps that is a good thing, and you may want to file for bankruptcy as soon as possible to secure these exemptions. Or if you prefer your new state's exemptions, you could wait until you have lived there long enough to qualify for this state's system before you file.
Pre-Bankruptcy Filings
Make sure that you know your state's laws when it comes to exemptions. For instance, in some states, you first have to record a homestead declaration before you could be eligible for a homestead exemption. In this scenario, you would have to file for a homestead declaration before you ever filed for bankruptcy if you want your home to be safe from bankruptcy. You want to make sure that everything is in order so that you can use all the exemptions you qualify for.
Converting or Selling Nonexempt Assets: Proceed with Caution
If you have assets that are not eligible for an exemption, there are times when you may be able to legally sell this property, or exchange it for exempt property. One example would be if you have too much in a bank account than you are able to protect from an exemption. In this case, you might be able to use the excess funds on daily needs for you and your family before you file for bankruptcy, or you could also buy property that would be eligible for exemption before you file.
Of course, this has to be done in moderation. Some courts could view this as bankruptcy fraud, while others will see this as allowable as long as you did not try to hide your actions, did not take these actions during bankruptcy, or did not try to convert a highly valuable piece of property, etc. You should consult a bankruptcy attorney to understand what actions are allowed in your jurisdiction.
Waiting to File
In some cases, waiting can be beneficial, such as if you are waiting on a tax refund. This would be money that you could not get an exemption for, so you may want to hold off on filing until you can get the money and use it for necessities.
To find out more about how you can prepare for bankruptcy, be sure to get in contact with a bankruptcy lawyer is who is familiar with your state's laws and your local courthouse. You can also learn more about how to protect your property in the bankruptcy process when you talk with a legal expert. Find the bankruptcy attorney you need on our directory today!