Protecting Investments in Bankruptcy
Advice on the options available for protecting
investments during bankruptcy
The process of filing for bankruptcy as a means of relieving debt is stressful for most people, particularly
those who concerned with protecting their investments. You have a number of options available if you`re in this
position. Depending on where you live, how your investments are distributed and how you go about seeking
professional assistance, you can take steps to protect your assets during bankruptcy.
Seek Professional Assistance
Consider asking for professional advice so you`re informed during the entire bankruptcy process. An experienced
attorney or tax professional can answer any questions you may have and guide you through the methods available for
protecting your investments.
|Steps can be taken to protect one's assets and investments during bankruptcy
Evaluate Federal and State Exemptions
Every state in the US has its own bankruptcy exemption tables in place, alongside the federal ones. While most
states require you to follow their individual exemption system, 19 states currently allow you to choose between
their individual system and the federal system. If you reside in one of these states, then you have the advantage
of choosing the table that provides the greater advantage when exempting your investments from bankruptcy.
Consider Options for Protecting Assets
Once you have determined whether you will be following the guidelines for federal or state exemptions, you can
evaluate how best to divide your investments so that you can protect as many as possible. Below are some general
guidelines on how common types of investments are regarded under federal law during the bankruptcy process.
Individual Retirement Accounts are protected from bankruptcy filings up to the amount of $1,245,475 as of 2013.
Examples of IRA plans include Roth IRAs, 401k plans, 403b plans, Keogh plans, money purchase plans, defined-benefit
plans and profit sharing plans.
If you invested money into a child`s or grandchild`s 529 plan or Coverdell Education Savings Account more than
two years prior to a bankruptcy filing, the entire amount is protected from creditors. Education plans that have
been active for at least one year but less than two years have a $5,000 limit per beneficiary.
Life Insurance Policies
With the exception of credit life insurance, all policies of this nature that have not matured are protected
from bankruptcy proceedings. You can also keep up to $12,250 of a life insurance policy`s loan value.
Home and Car Equity
Investments that accrue equity, such as your home and car, are up to a certain limit in the event of a
bankruptcy filing. Home equity of $22,975 or less and car equity of $3,675 or less is protected under federal
Jewelry and Other Assets
You can protect your best pieces of jewelry from bankruptcy provided that you adhere to the $1,550 exemption
limit. Other assets that are protected under the federal system include household items with a combined value of
less than $12,250 and work tools with a value of $2,300 or less.
If you are in a financial crisis and are worried about protecting your investments, then you may want to
evaluate alternatives to filing bankruptcy as well. These options include debt settlement and debt consolidation.
Websites such as nationaldebtrelief.com can guide you in the process of determining the best course of
action for relieving your debts while keeping your assets intact.