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Exemption Planning in Bankruptcy -
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Pre-bankruptcy Exemption Planning
Different Conclusions in the Courts Courts have come to a variety of different conclusions on these issues. Some allow it as perfectly acceptable, contemplated by the bankruptcy law, and being akin to taxpayers organizing their personal and business affairs to minimize payment of income taxes. This is believed to be the better view. Other courts, perhaps ignoring the clear congressional intent, have disallowed such planning efforts and punished the debtor. Finally, in what is probably the most common result: courts allow such planning, as long as the debtor does not do too good of a job at it. If the transfer involves, say, $10,000 or less, then it will probably pass muster. If the conversion extends into the hundreds of thousands of dollars, on the other hand, the court will be more inclined to find a reason to disallow the exemption or otherwise punish the debtor.
Uncertainty and the Debtor's Lawyer The uncertainty in this area of asset protection makes it a very difficult job for the debtor's lawyer. Even after decades of case law on the subject, no "bright-line" test has emerged as to what is acceptable and what is not. Much will often depend on such variables as the location of the court, the proclivities of the particular panel trustee assigned to the case, the aggressiveness of the local U.S. Trustee, and the personal feelings of the bankruptcy judge assigned to the case. The attorney needs to be careful, because he faces potential personal civil and criminal liability if he is involved in planning which is subsequently found to be improper. Practitioners should review the facts of each case carefully. Then, they should harken back to the old saying: "Hogs get slaughtered, little piggies get to come back for more".
Written by Henry Rendler | ![]() | ![]() ![]() ![]() ![]() ![]() ![]() ![]() - Automatic Stay - Avoiding Powers - Lien-stripping - Race to the Courthouse ![]() ![]() - Bankruptcy Estate - Federal - Homestead - Planning ![]() ![]() ![]() ![]() ![]() ![]() ![]() ![]() - Asset Liquidation - Chapter 7 Discharge - Non-dischargeable - Repayment of Debts ![]() - The Debtor - Filing Chapter 9 - Jurisdictional Issues ![]() - Debtor in Possession - The Examiner - Reorganization/Debtor - Chapter 11 Trustee - Creditors Committee - Finances - Filing Lawsuits - Creditors' Rights - Dismissal/Conversion - Selling of Assets - Reorganization Plan - Plan Procedures - Plan Provisions - Claims - Common Plans - Payment of Interest - Chapter 11 Attorney ![]() - Qualifications - The Discharge ![]() - Advantages - Filing Chapter 13 - Meeting of Creditors - Filing Chapter 13 Plan - Creditors' Claims - Plan Confirmation - Order Confirming Plan - Appealing OCP - Modifying Plan - Defaulting - Discharge ![]() ![]() ![]() ![]() ![]() ![]() ![]() ![]() ![]() ![]() ![]() ![]() ![]() ![]() |