June 24, 2019

Asset Protection Basics: What You Need to Know if You Owe Debts You Cannot Pay

question themeMany people who want to come in and talk about asset protection are surprised to learn that they have no assets to protect. “How can this be? “I own a car and a house!”

Asset protection comes in to play if you own property that has equity above the mortgages owed (called non-exempt property — property that creditors can reach); or if you anticipate that you may have non-exempt property in the future.

What’s exempt property? Learn by example

North Carolina residents are allowed, for example, a $3500 exemption in any automobile. If you own a car free and clear of liens that is worth more than $3500, then you may have cause for concern. However, if you are making payments on a car, then you probably have no equity whatsoever. So, the fellow driving the 2005 Hyundai that’s owned free and clear may actually have an asset worth protecting, but the fellow driving the flashy 2010 BMW may not. Appearances are deceiving.

Here’s an instructive case of a man who has no non-exempt property whatsoever, but is in serious debt. His elderly father will leave him a substantial inheritance when he dies. This is a fellow that needs to be concerned about asset planning – get rid of the debts today and protect what may come in the future.

How I can help

For people who have genuine reasons to retain me for asset planning and protection,I  provide these basic functions:

  • Help clients determine what he or she is personally liable for (just because you’re married doesn’t mean you are liable for all of your spouse’s debts; just because your company fails doesn’t mean you owe its debts)
  • Help clients determine what are his or her assets, and then what is exempt, what is not exempt
  • Analyzing present and future income
  • Advising clients how to protect assets and income from creditors as much as possible

I am a legal specialist in the area of financial distress.  Sometimes my work in asset planning and protection uncovers the need for estate planning, in which case I will refer clients to another firm to execute professionally.  I do not set up trusts, but, if appropriate, I can again refer clients. Most of the trusts I see that are set up for purposes of evading creditors are completely worthless.