Step Three on the Ladder: Bankruptcy Considerations, Exemptions, and Marital Planning

• Author: Jeffrey Robert Matsen
• Profession: Founder and managing partner of Matsen Voorhees Mintz LLP
• Pages: 35-38

35

CHAPTER

7

Step Three on the Ladder

Bankruptcy Considerations, Exemptions, and Marital Planning

Any discussion of Asset Protection Planning should include at least a brief examination of bankruptcy

laws. Hopefully, this will never be an alternative for most business owners or professionals facing finan-

cial troubles. A Bankruptcy Judge has much broader and more liberal powers to reach debtors’ assets

than a State Court Judge; thus, for anyone who has assets, bankruptcy is not a very good option. It is

important, however, to at least acknowledge the worst and plan accordingly.

There are various exemptions available under both bankruptcy laws and state creditor remedies that

are important to consider. Moreover, there may be some Marital Planning that can enhance an Asset Pro-

tection structure. All of the above considerations will be addressed in this chapter.

Bankruptcy Considerations

Any discussion of bankruptcy must be undertaken with the understanding that estate domicile is very

important. Bankruptcy law supersedes state law in most instances, but sometimes the bankruptcy court

will defer to state law where there is no specific bankruptcy provision to the contrary. Any business owner

or professional under attack by a creditor (where bankruptcy may be a consideration) should consult with

local bankruptcy counsel to better understand bankruptcy ramifications.

As mentioned previously, generally, any transfer of assets to another entity or person within two years

before the date of filing made with the actual intent to hinder, delay or defraud any present or future credi-

tors may be voided by the bankruptcy court. This provision of the bankruptcy law is closely intertwined with