If you find yourself struggling to pay your bills and make ends meet because of debt, then you might be considering bankruptcy. Bankruptcy at an older age could have a negative impact on many aspects of your life, but the good news is that there are exemptions that help protect things like your retirement benefits and some personal belongings.
If you already started estate planning, this could be a helpful way to avoid losses during bankruptcy, too. For example, if you have a trust that you’ve placed many of your assets into, then those may not be considered part of your estate for the purposes of bankruptcy. Essentially, taking assets out of your name may protect them against creditors and help you avoid losing them even if you do go through bankruptcy.
The type of trust you have matters during bankruptcy
The kind of trust you’re using will matter as you approach a bankruptcy. For instance, if you have an irrevocable trust, then you can almost be certain that the trust will not be involved in your case. The assets in that trust are technically not yours, even though you placed them there.
If you don’t have an irrevocable trust, then your assets could, potentially, be at risk if you have creditors coming after you when you seek bankruptcy. Usually, you must have an irrevocable trust in place to protect your assets against creditors.
What should you do if your trust, or lack of one, leaves your assets at risk?
You should remember that there are bankruptcy exemptions that may help you avoid losing your assets even if you don’t have a trust in place. Many financial accounts you have, like retirement or state benefits, should be protected. Similarly, you may be able to use exemptions to protect your vehicle or home.
It’s a good idea to look into the specific exemptions that will apply in your bankruptcy case so that you can take action to protect yourself as you move through the bankruptcy process or look for other avenues to resolve your debts without putting your assets at risk.