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Here at Shenwick & Associates, many of our clients are understandably concerned about how to protect their assets from creditors––especially their home. While there are limits on how much asset protection we can provide clients when presented with an immediate crisis (i.e. a foreclosure sale), with advance planning, there are several strategies debtors can use to protect their most valuable asset. Let's look at a few of these asset protection techniques and devices:
1. The homestead exemption. Most, but not all states provide a homestead exemption (for example, New Jersey has no state law homestead exemption, forcing debtors to use federal bankruptcy exemptions, which are currently $22,975 per debtor, to retain any equity in their home). On the other end of the protections spectrum are states like Texas and Florida, which place no limit on home equity that can be protected from creditors. In New York State, the homestead exemption varies by region of the state, but for downstate counties, the homestead exemption is $150,000 per debtor. While that's a significant amount, given the value of real estate in the New York metropolitan area, many homeowners have much more equity in their homes than can be protected under the homestead exemption.
2. Ownership of your house as tenants by the entirety. There are several ways that two or more persons can own property–as joint tenants, as tenants in common or as tenants by the entirety. While any people can own any property in a tenancy in common or a joint tenancy, ownership as tenants by the entirety is limited to:
a. The state you live in must recognize this form of property ownership (New York and New Jersey do, but Connecticut does not).
b. You must be married to your co–tenant; this type of ownership is strictly limited to married couples.
c. The property must be must be your personal residence.
d. The tenants by the entirety must take title to the property at the same time and with the same deed.
In a tenancy by the entirety, neither spouse may voluntarily, or involuntarily, convey their interest in the home without the consent of the other. This rule places the home out of the reach of the creditors of one of the spouses. However, there are some circumstances in which the protections of tenancy by the entirety won't protect debtors:
a. Joint and several debts of the spouses;
b. Divorce; and
c. Death
3. Limited liability companies (LLCs) and family limited partnerships (FLPs). These two types of entities can be useful to hold real estate in. However, there are some potential drawbacks of owning a primary residence via a LLC or a FLP. For example, loss of tax benefits–when a property is owned by natural persons, mortgage interest is deductible, and when the home is sold, $250,000 of capital gains per person (or $500,000 for a couple) is exempt from capital gains taxes. Unless only one of the spouses owns all of the interests in a LLC or FLP, those tax benefits will be lost–and in a recent case, a court set aside the protections of a LLC even when only one spouse owned all of the membership interests in the LLC. Therefore, this may not be optimal for protecting a primary residence.
4. A qualified personal residence trust (QPRT). This is a special type of irrevocable trust that is designed to hold and own your primary or secondary residence. However, while having your residence owned by a QPRT has both asset protection and estate planning benefits, there are also some drawbacks. For example, you don't own your home anymore, and after the term of thrust ends, you will have to pay fair market rent to the beneficiaries of the QPRT.
5. More complex asset protection strategies. These may include getting a loan and/or a mortgage (or additional mortgages) to reduce the value of the equity in your home as much as possible (a so called "debt shield") and using a domestic asset protection trust or asset protected investments (such as annuities and whole or universal life insurance policies) to repay the lender.
As you see, asset protection strategies can get quite complex, and using entities such as LLCs, FLPs and trusts takes time to implement, which is why you should start planning right away to protect your assets, and not wait for a crisis like a judgment or foreclosure to strike. To protect your most precious assets for yourself and the ones you love, please contact Jim Shenwick.
According to Joliet Bankruptcy Lawyer, David Siegel, Joliet has always been a tough, blue-collar, hard-working town in Will County, Illinois. When times are tough in the state of Illinois, they are especially tough in Joliet. And times have been really tough lately. The housing market has not recovered in this area. The job market+ Read More
The post Joliet Bankruptcy Lawyer States “You Need Not Struggle Anymore” appeared first on David M. Siegel.
People often wonder what percentage creditors are going to be paid back in a chapter 13 bankruptcy. As a bankruptcy attorney in Chicago, I can only estimate what the approximate amount may be. The reason why I cannot provide a definitive answer is because I do not know what type and amount of claims are+ Read More
The post What Percentage Gets Paid Back In A Chapter 13 Bankruptcy? appeared first on David M. Siegel.
While serving in the military, individuals have the same rights as regular civilians to file bankruptcy protection in order to save their valuable assets. However, individuals should keep in mind that certain high-ranking positions require security clearances that may not be available to people who have filed for bankruptcy. Nevertheless, there are no legal restrictions... Read more »
The post Can You File Bankruptcy While in the Military? appeared first on Allmand Law Firm PLLC.
While serving in the military, individuals have the same rights as regular civilians to file bankruptcy protection in order to save their valuable assets. However, individuals should keep in mind that certain high-ranking positions require security clearances that may not be available to people who have filed for bankruptcy. Nevertheless, there are no legal restrictions […]
The post Can You File Bankruptcy While in the Military? appeared first on Allmand Law Firm PLLC.
There are several ways to stop a wage garnishment. One of the ways that I deal with on a daily basis is by filing chapter 7 or chapter 13 bankruptcy for individuals and families struggling with debt. Chapter 7 bankruptcy filing involves the creation of an automatic stay. The automatic stay prohibits collection activities after+ Read More
The post How To Stop A Wage Garnishment? appeared first on David M. Siegel.
Judge Brian Lynch has now been appointed as Chief Bankruptcy Judge for the Western District of Washington effective October 1, 2014. Before joining the court, Lynch was a partner at the Seattle law firm of Bishop White & Lynch and then for years served as a Chapter 13 Trustee for the District of Oregon.
Read More
The original post is titled Judge Brian Lynch Now the Chief Bankruptcy Judge for Western District of Washington , and it came from Portland Bankruptcy Attorney | Northwest Debt Relief .
When
someone files for bankruptcy, an estate is created that consists of, among
other things, any and all assets owned by, or to which the debtor filing the
bankruptcy case has a right to or interest in. This includes tangible
things such as real estate, vehicles, money, clothing, and jewelry, as well as
rights to property such as litigation claims.
In a
Chapter 7 case, all assets belong to the trustee on the date a case is filed
unless an exemption is claimed, and the trustee gets to keep, sell or otherwise
administer assets for the benefit of creditors.
When
it comes to determining "property of the estate," timing is
important. Generally speaking, a debtor gets to retain property acquired after
the bankruptcy filing occurs. Read More ›
Tags: 6th Circuit Court of Appeals, Chapter 7
A few days ago, the 11th Circuit Court of Appeals issued its decision in the case of Airtran Airways, Inc., v. Brenda Elem, et al., case 13-11738 (11th Cir. Sept. 23, 2014). This case involved a situation in which a Georgia attorney misrepresented to Airtran that the recovery on a vehicle accident for its employee was only $25,000. The actual recovery was $500,000 (one check for $25,000 and another for $475,000). Airtran was due a reimbursement of the medical costs it had paid under its employee welfare benefit plan.
Bad KarmaBut the Court stated that the attorney's "sin then found him out" (Bible, Numbers 32:23) when he accidentally sent Airtan a copy of the the $475,000 check instead of the $25,000 settlement check. The District Court entered summary judgment against the employee and the Georgia lawyer. On appeal, the 11th Circuit affirmed.
Legal or Equitable Relief?One of the grounds of the appeal it was the argument that Airtran was seeking a legal remedy, ie. a money judgment and not equitable relief that was permitted under the civil enforcement provisions of ERISA. Airtran argued that it was seeking equitable relief as its suit sought to recover "specifically identifiable funds" in the "possession and control" of the employee and attorney, and that the employee welfare benefit plan created an equitable lien on the funds.
The Court held that the relief sought Airtran "sounds in equity" and sought to enforce the equitable lien created by the plain terms of the employee welfare benefit plan agreement. The Court explained the distinction that the remedy of money damages "is quintessentially a remedy at law" and that for this reason, the employee welfare benefit plan could not "file suit against a beneficiary and seek recovery from 'assets generally' of that beneficiary." But the Court found that the relief sought was equitable in nature as it sought "specifically identifiable funds" in the "possession and control" of the beneficiary.
Equitable Lien Not DestroyedThe Court rejected the argument that Airtran was not pursuing equitable relief as the settlement funds had already been divided between the employee and her attorney. The Court held that "as soon as the settlement fund was identified, the plan imposed an equitable lien over that fund even though it was in the hands of the beneficiaries." The Court agreed with other circuit courts that held that [p]roperty to which the lien attached may be converted into other property without affecting the efficacy of that lien." In short, the Court explained the employee as a "constructive trustee could not destroy the lien that attached before . . . [the employee] divided the funds with her attorney" and that the specifically identifiable funds "did not disappear when they divided the money."
The Court rejected the remaining arguments of the employee and her attorney and upheld the District Court's summary judgment.
Jordan E. Bublick is a Miami Bankruptcy Lawyer with over 25 years of experience in filing Chapter 13 and Chapter 7 Bankruptcy Cases and Mortgage Modifications (305) 891-4055
A few days ago, the 11th Circuit Court of Appeals issued its decision in the case of Airtran Airways, Inc., v. Brenda Elem, et al., case 13-11738 (11th Cir. Sept. 23, 2014). This case involved a situation in which a Georgia attorney misrepresented to Airtran that the recovery on a vehicle accident for its employee was only $25,000. The actual recovery was $500,000 (one check for $25,000 and another for $475,000). Airtran was due a reimbursement of the medical costs it had paid under its employee welfare benefit plan.
Widespread Use of ProverbsBut the Court stated that the attorney's "sin then found him out", alluding to the proverb (Numbers 32:23), when he accidentally sent Airtan a copy of the the $475,000 check instead of the $25,000 settlement check. Proverbs, including biblical proverbs, have been been long used in federal and state court decisions in the United States and around the world. One author wrote that proverbs are used in judicial decisions to "enable the avoidance of lengthy accounts which helps to both save time and to give an apt account of events" and to "question the logic of one's engagement in certain acts."
Bankruptcy Court ProverbsThe Supreme Court noted a proverb in the bankruptcy fraudulent conveyance context - "the proverbial "Elizabethan deadbeat who sells his sheep to his brother for a pittance.'" BFP v. Resolution Trust Corp., 511 US 531 (1994). The late Judge Pasky of the Middle District of Florida, in a situation of a failed chapter 11 case used the old Latin proverb "parturient montes nascitur ridiculus mus" ("that mightily labored the mountains just to give birth to a ridiculous mouse." In re Mandalay Shores, 62 B.R.758 (Bankr.M.D. Fla. 1986). Another bankruptcy court, As to the overzealousness of a bankruptcy trustee, wrote "never step oer one duty to perform another" (old English proverb).
Legal or Equitable Relief?Airtran filed suit to recover the funds from the employee and the attorney. The District Court entered summary judgment against the employee and the Georgia lawyer. On appeal, the 11th Circuit affirmed.
One of the grounds of the appeal was the argument that Airtran was seeking a legal remedy, ie. a money judgment and not an equitable relief that was permitted under the civil enforcement provisions of ERISA ("to enjoin any act or practice which violate any provision of this subchapter.") Airtran argued that it was indeed seeking equitable relief as its suit sought to recover "specifically identifiable funds" in the "possession and control" of the employee and attorney and that the provisions of employee welfare benefit plan agreement created an equitable lien on the funds.
The Court held that the relief sought by Airtran "sounds in equity" and sought to enforce the equitable lien created by the plain terms of the employee welfare benefit plan agreement. The Court explained the distinction that the remedy of money damages "is quintessentially a remedy at law" and that for this reason, the employee welfare benefit plan could not "file suit against a beneficiary and seek recovery from 'assets generally' of that beneficiary." But the Court found that the relief sought was equitable in nature as it sought "specifically identifiable funds" in the "possession and control" of the beneficiary.
Equitable Lien Not DestroyedThe Court rejected the argument that Airtran was not pursuing equitable relief as the settlement funds had already been divided between the employee and her attorney. The Court held that "as soon as the settlement fund was identified, the plan imposed an equitable lien over that fund even though it was in the hands of the beneficiaries." The Court agreed with other circuit courts that held that [p]roperty to which the lien attached may be converted into other property without affecting the efficacy of that lien." In short, the Court explained the employee as a "constructive trustee could not destroy the lien that attached before . . . [the employee] divided the funds with her attorney" and that the specifically identifiable funds "did not disappear when they divided the money."
The Court rejected the remaining arguments of the employee and her attorney and upheld the District Court's summary judgment.
Jordan E. Bublick is a Miami Bankruptcy Lawyer with over 25 years of experience in filing Chapter 13 and Chapter 7 Bankruptcy Cases and Mortgage Modifications (305) 891-4055
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