I talk to many residents in Western North Carolina who are approaching retirement age, and are having financial difficulties. As an Asheville bankruptcy attorney, I can help folks sort through fact and fiction when deciding how to protect the assets you intend to pass on to your relatives after death.
End debt, don’t pass it on
Exemptions inside and outside of bankruptcy
Exemptions protect property from the reach of creditors. Whether you file a bankruptcy case or not, there is certain property creditors are not allowed to take away from you in order to satisfy a debt owed to them. This property is called “exempt.” An important concept in North Carolina bankruptcy law is that your statutory exemptions apply whether you file a bankruptcy case or not. A very common strategy for a couple approaching retirement, who have no non-exempt assets, is to simply do nothing. Although the creditor can get a judgment by filing a civil lawsuit, that creditor would be stuck trying to collect on that judgment, and could not seize any property that the debtor claimed as exempt. Many times, the creditor cannot collect because the debtor is “judgment-proof.”
What happens after death?
The property you leave behind in a will (or by the rules of intestacy if you had no will at death) must be administered in a process called probate. Part of the probate process is to notice creditors who can then make claims on the property you owned at death. Those properly filed claims get paid prior to your property being distributed to your heirs.
Another common strategy is to leave property to heirs via a trust agreement. This too can prove problematic when dealing with a deceased person’s creditors because heirs can become liable for debts to creditors up to the amount gifted from the trust agreement to that heir if those creditors are not properly noticed of the death.
Bankruptcy is different.
Bankruptcy is a process which permanently eliminates a person’s debts. By properly exempting property, we can protect it. At the same time, achieving a bankruptcy discharge can help avoid any conflict between your creditors and your heirs after death. Because the debts are discharged, those debt are no longer valid against you or anyone else.
If you are ready to talk more about your asset protection options, please contact me for a free, initial bankruptcy consultation.
