One of the most common issues that many people don't understand when it comes to filing for bankruptcy is asset protection. By now many of our Escondido readers probably know that there are certain assets that can be protected under bankruptcy exemptions, but they may not know what type of assets qualify.
Asset protection is a financial issue that transcends bankruptcy proceedings, but it is an issue that can be front and center during a bankruptcy filing. Creditors obviously have an interest in getting a claim in on an asset during a bankruptcy proceeding, otherwise they may never see a dime of what was loaned to the debtor. That is why it is so important to put together an exemption plan.
Make no mistake: an individual who files for bankruptcy, Chapter 7 bankruptcy in particular, will have a tough time holding on to all of their assets. However, certain assets, such as retirement savings and assets that the court determines are necessary for the filer to live, can be protected.
The fact that assets may be up for grab, in a sense, during a bankruptcy proceeding may give someone pause in thinking that filing for bankruptcy is a good option. The fact remains, however, that filing for bankruptcy is oftentimes the best solution for someone who is dealing with an untenable amount of debt. Failing to make the proper payments on certain items, such as a car that was purchased through a loan or a home with a mortgage, will subject those items to potential seizure by creditors anyways. At least a bankruptcy filing has the potential to get the debts discharged and take care of the matter altogether.
Source: Forbes, "Ten Rules For Asset Protection Planning," Jay Adkisson, July 13, 2011