We help our Chapter 7 and Chapter 13 clients protect assets with strategies that other attorneys probably never even think about
The bankruptcy exemptions in New York State are generally much better than those in other states. However, even in the simplest bankruptcy case, there is potential exposure if the assets and available state and federal exemptions are not carefully reviewed by the bankruptcy attorney. One area in which our firm truly stands out is the area of exemption planning. In fact, some of the bankruptcy trustees regularly joke that “Peter thinks everything is exempt.” While that is not quite true, there is no doubt we are very aggressive in planning to protect our clients. Here are a few examples:
Example 1. Business client expected a $30,000 tax refund because of significant business tax credits. We advised him to delay his chapter 7 bankruptcy filing until after receiving the tax refund and then use the money to pay down his mortgage. Although the bankruptcy trustee objected, the Court fully supported our position and issued a reported decision on the subject of exemption planning, which we think will set the legal standard locally for years to come
Example 2. Debtor owned a whole life insurance policy naming his wife as beneficiary. The cash value of the policy was several thousand dollars. The law was uncertain at the time regarding the debtor’s ability to exempt the cash value of the policy. We had the debtor change the beneficiary on the policy from his wife to his son without assigning the cash value. He then filed his chapter 7 bankruptcy. The trustee argued that the change in beneficiary was fraudulent as to creditors, but the bankruptcy judge agreed with our position and held the policy exempt.
Example 3. Debtor owed several hundred thousand dollars in business debts due to a bad franchise investment. He needed to file bankruptcy but had about $60,000 in a stock trading account that would not have been exempt. We had him take the money and pay off most of his student loan debt. He then waited 90 days to file his chapter 7 bankruptcy so that the trustee could not reverse the transfer. The trustee considered pursuing an objection but backed off, and the debtor was able to use the money effectively to pay off a debt that he could not have discharged in his bankruptcy case.
Example 4. Debtor had two newer vehicles with about $15,000 in equity. If he had filed chapter 7 bankruptcy right away, the trustee would have taken the vehicles and sold them. So the debtor borrowed $15,000 from his in-laws and gave them a lien against the vehicles. During the next six months, he used the loan money to pay his mortgage and other living expense (he was unemployed at the time and truly needed the loan). He then filed the bankruptcy. The trustee could not make a claim against the vehicles because lien given to the in-laws absorbed most of the equity in the vehicles, and the remaining equity was exempt.