There are two sides to every outstanding debt: the debtor and the creditor. When the debtor fails to pay back their debt according to the terms outlined in the initial loan, the creditor may choose to take action and recover the outstanding balance. For debtors, these actions may include seizing and liquidating (selling off) assets and then using the proceeds to pay off a debt. However, assets that are protected from this process are immune from being seized. This makes proper asset planning extremely important, especially for anyone who has anything extremely valuable that they wish to protect. Here are a few simple guidelines that everyone should follow when planning to protect their assets.
Plan Early & Often
Most people put off asset planning until they’re facing financial trouble and it might be too late. If you don’t plan before a claim on your assets arises, you could find it next to impossible to hang on to that asset. What you do after a creditor files a claim against you could be undone fairly easily by a “fraudulent transfer” law. Contrary to popular belief, a creditor serving you notice or sending you a demand letter isn’t usually when a claim starts: it’s just when you first hear about it. Don’t wait until then to develop a protection plan.
Don’t Ignore Insurance
Asset planning is one way to protect your valuable property, but it’s in no way an adequate substitute for professional insurance. Insurance should always be first, asset planning should simply supplement it to really keep a good secure grasp on your most important possessions. Asset protection plans don’t scare away creditors, and they don’t pay to defend you against a debt collection lawsuit. Those are exactly what you pay a premium for when you purchase an insurance plan—let them pay to defend and settle the claim against you.
Separate Business & Personal Assets
Corporations, partnerships, LLCs, and other business entities are not meant to be used as ways you can protect your personal assets like big, unbreakable piggy bank. Placing your assets into one of these entities dramatically increases the chances that your creditor will still try to lay claim to them, citing that your corporation is instead an alter-ego or other persona which you have control over, thus negating those protections. Keep your business assets in your business, and your personal assets with yourself.
If you’ve been sent a demand letter or served notice of a debt collection lawsuit against you, don’t hesitate to protect your rights by calling The Buchalter Law Group and letting a Brevard County bankruptcy attorney assist you, starting with a free consultation.