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How to Protect Your Assets in Bankruptcy

When contemplating bankruptcy, many people assume that the process leaves them with no assets, but in many cases, that is not true.  Federal exemptions, which can be used in a bankruptcy case in New Jersey,  protect certain property from being included in the assets available for distribution among your creditors.

People also often assume that bankruptcy is effective in wiping out all of their existing debt, but this is not necessarily true either. Some taxes, certain student loans, and child support and alimony are examples of types of debts that are nondischargeable, and your liability for them can continue despite bankruptcy.

Exemption Planning

A person considering bankruptcy must be careful not to run afoul of the law which prohibits a debtor from transferring or concealing property prior to filing bankruptcy with the intent to hinder, delay, or defraud a creditor.  But prior to filing a bankruptcy, you can legally convert nonexempt assets into protected, exempt assets by rearranging those assets to fit exemption categories under bankruptcy law.

For instance, cash on hand which exceeds the exemption amount can be used to pay for daily needs such as food, rent, utilities, or gas for the car.  Selling a nonexempt second vehicle to provide a large down payment on a new leased vehicle with affordable payments may make sense.  Under certain circumstances, it may also make sense to protect nonexempt home equity by taking a home equity loan to purchase exempt assets.

If you are thinking about bankruptcy or simply want to know how to arrange your assets to legally maximize their protection from creditors, contact us for a consultation. Hollander, Strelzik, Pasculli, Hinkes, Wojcik, Gacquin, Vandenberg & Hontz, L.L.C. serves clients across northwestern New Jersey from our main location in Sussex County.

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