As a bankruptcy attorney in Asheville NC, a big part of my job is to help clients achieve the best financial outcome possible after they have decided to file a case. Filing for bankruptcy is a tough decision which should only be made after a clear plan for recovery has been established. It may be smart to sell some property, buy some property, delay filing your case, or file your case quickly in order to achieve the best possible outcome.
Pre-Bankruptcy Exemption Planning
Maximizing the exemptions you are entitled to is both permissible and smart under the Bankruptcy Code. I commonly advise clients to delay their bankruptcy case until they qualify to use the North Carolina exemptions (2 years living in NC is the basic standard). Other times, I recommend filing as soon as possible because the federal exemption scheme will protect more of their property. You have a right to decide when to file your case, and it is important to do so. Bankruptcy courts have also held it permissible to sell non-exempt assets and use the cash to purchase other exempt property or to pay bills before filing, like next month’s mortgage or rent payment. Or you could use the money to pay for your bankruptcy case. The bottom line is that simple planning can avoid non-exempt property from being seized by a bankruptcy trustee. Instead, you can invest that same money to help speed up your financial recovery after discharge.
“Pigs Get Fat, Hogs Get Slaughtered”
Nacho is fat & happy, like a pig
Excessive conversion of nonexempt property into exempt assets on the eve of filing a bankruptcy case is considered bankruptcy fraud. A pig, like my dog Nacho over there, meanders through life fat and happy without a care in the world. A hog, on the other hand, gets punished for his gluttony by getting slaughtered. When evaluating your exemption planning, a bankruptcy judge will consider the value of the converted assets, when the assets were converted, and if you disclosed the exemption-planning transactions on your petition (they’ll decide whether you were a pig, or a hog). This can be tricky, and is a good reason to hire a qualified bankruptcy attorney to help with your case.
Delay Your Filing, Save Your Tax Refund
This time of year, a very simple way to save your tax refund is to spend it before you file. Many people can protect their entire refund using their North Carolina “Wildcard” exemption of $5,000 per spouse. If you are using that particular exemption for other property, however, you can wait to file until after the tax refund gets spent on household necessities. Then, file your bankruptcy case a couple weeks or months later after the refund is gone and is no longer an asset which needs protecting. The timing of your filing is often critical to getting the most out of your case during tax season.
If you would like my thoughts on the best strategy for your financial future, and you live in Western North Carolina, contact me for a free, initial bankruptcy consultation.
*The information contained on this website is not intended and does not constitute the providing of any legal advice or any legal opinions or services to any user thereof. The information available on or through this web page is not intended and shall not be used as a substitute for the advice and consultation provided by an attorney. Any factual examples used to illustrate concepts are hypothetical and do not depict actual events or real persons.
