Filing Bankruptcy: How to Protect Your Assets

TRI Writer • August 5, 2020

If you are considering filing bankruptcy, you are most likely wondering how you can protect your assets. Protecting assets in bankruptcy requires both expertise and foresight. In Chapter 13 bankruptcy, petitioners are typically allowed to keep all their property, but in Chapter 7 bankruptcy, nonexempt assets are often “liquidated” and sold to pay creditors. So if you do not actively seek to protect your assets when filing Chapter 7 bankruptcy, the bankruptcy trustee will convert them to cash and distribute the money to creditors.

Protecting Your Assets with Bankruptcy Exemptions:

Bankruptcy exemptions are determined by state law. Exemptions determine how much of a bankruptcy petitioner’s property can be protected. In most cases, Georgia and Tennessee bankruptcy petitioners can expect bankruptcy exemptions to protect:

  • Family Vehicle (up to $5,000)
  • Household Goods, Furniture, and Clothing (up to $5,000 for household goods)
  • Jewelry (up to $500)
  • Personal Injury Recoveries (up to $10,000 in Georgia and up to $7,500 in Tennessee)
  • Majority of Retirement Accounts, 401(k)s, Pensions, and Profit-Sharing Plans
  • Social Security Income
  • Your Home (Georgia’s Homestead Exemption allows up to $21,500 or $43,000 if the property title is held by only one spouse; $10,000 of unused homestead exemption may be applied to any other property)
  • Wages (75% of earned but unpaid weekly disposable earnings or 40 times the state or federal minimum wage (in Georgia) or 30 times the federal minimum plus $2.50 per week per child in Tennessee)

Additional exemptions may apply to your situation. For a complete list of bankruptcy exemptions and how they apply to your situation, discuss your case in detail with an experienced Georgia and Tennessee bankruptcy attorney. In some cases, the Chapter 7 trustee may allow a petitioner to negotiate the nonexempt property’s buy-back. Discuss the buy-back of a nonexempt property option with your bankruptcy attorney.

Asset Protection and Bankruptcy Planning:

Using certain asset conversion strategies may help bankruptcy petitioners protect their assets during bankruptcy by utilizing the full statutory exemptions. Specific amounts of nonexempt liquid assets may be used to purchase a vehicle, contribute to retirement accounts, pay down a mortgage balance, obtain a life insurance policy, pay off nondischargeable debts such as student loans, past-due child support, or tax debt. Other, more advanced bankruptcy planning strategies can also be useful, but only well in advance of a filing: asset protection trusts, equity reduction by financially encumbering an asset or accounts-receivable financing. (The last option being applicable if you are a business owner with the option to borrow against the business’s accounts receivables to encumber the future “value” of the company making it a less attractive asset to the bankruptcy trustee).

If you are worried about protecting your assets during bankruptcy, we can help. Trust the experienced Tennessee and Georgia bankruptcy attorneys at Kenneth C. Rannick P.C. to help you determine your best options. We help good people through bad times every day, and we can help you, too.

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