Pre-Bankruptcy Planning

Asset protection is an important issue for individuals that are defendants in litigation or in financial distress. Parties that are contemplating bankruptcy ponder how to protect their assets from their creditors. Asset protection and pre-bankruptcy planning occurs when a party contemplating filing for bankruptcy converts non-exempt assets into exempt assets. An exempt asset is an asset that is protected by either a state or federal exemption statute that excludes particular assets from being subject to execution by a bankruptcy trustee or creditor. An exempt asset is not available for distribution to a debtor’s creditors, and the particular asset is retained by the debtor.

 

This area requires a skilled attorney and deep examination into asset protection and pre-bankruptcy planning and its impact on a debtor’s discharge through Bankruptcy Code §727(a)(2)(A). Courts, pursuant to Bankruptcy Code §727(a)(2)(A), have denied debtors discharges when there were factual findings that a debtor’s pre-bankruptcy planning constituted a transfer of a debtor’s assets within one year of the filing of the debtor’s Chapter 7 case with the intent to hinder, delay, or defraud his or her creditors. E.g., Norwest Bank Nebraska, N.A. v. Tveten, 848 F.2d 871 (8th Cir. 1988).

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