You can legally take action to improve your status before filing bankruptcy. This is usually called exemption planning by arranging your assets to claim the maximum amount of exemptions in bankruptcy. The goal of this type of planning is to lose the smallest amount of property to your creditors.
If you transfer large amounts of property to family members or give away valuable assets, your actions may be deemed in bad faith. The trustee will evaluate any transfers or sale of any property within a year of filing bankruptcy. Improper transfers can be recovered by the court and may be grounds for denying a discharge.
This issue usually only occurs in a Chapter 7 bankruptcy case where the trustee may seize your non-exempt property and sell it to satisfy your creditors. In Chapter 13 bankruptcy, you keep all of your property and make a plan to pay the arrears.
How it is Done
You can take your cash in the bank, which is not exempt, and use it to purchase household items or necessities which are exempt. You can also sell your non-exempt assets such as a motor home and use the money to buy a modest car, and most to all of it will be exempt. Whatever the case, be sure to keep accurate records to prove to the court that you are acting in good faith.
If you would like more help in understanding exemptions in bankruptcy, contact a Hidalgo County bankruptcy attorney today.