Asset Protection
One goal of asset protection is to ensure that creditors cannot seize/levy upon your assets. In other words, a goal of asset protection is to make an individual judgment-proof. Oftentimes, planners focus on the laws of the individual’s state of domicile. However, if an individual either voluntarily files for bankruptcy, or more importantly, is involuntarily forced into bankruptcy, a different system of law applies to him. Bankruptcy courts effectively have a national scope of authority and significant equity
powers. Thus, planning for asset protection must not only consider the protections afforded (and exposure) under state law, but protections and exposure under applicable bankruptcy law as well.
11 USC §541 creates the “bankruptcy estate” of the debtor. a. The bankruptcy estate is basically the assets of the debtor. There are a number of statutes that control the contents of the bankruptcy estate (11 U.S.C. §§541, 522, 544, 547, 548, 549). The parameters of what assets are and are not included in a debtor’s bankruptcy estate are extremely important. Assets that are included in the bankruptcy estate can be used to satisfy creditor claims, and assets that are not included in the bankruptcy estate generally cannot be used to satisfy creditor claims. Thus, an important goal of asset protection planning is to structure assets so that such assets are not part of the bankruptcy estate.
- Anthony F. Vitiello, Esq.
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