This continues the series of our blogs about special legal and practical considerations for older Oregonians, although some of today’s blog will apply to people in every age group. We cover considerations about assets in two blogs, this one and next one.
Special Asset Considerations—
1) Greater Need to Protect Assets:
If you are a senior you may be “income poor” but comparatively “asset rich.” You have had a lifetime to gather assets and build equity in what you own. You may or may not feel like you have much, but what you do have you certainly want to protect.
The property exemptions—categories and amounts of your property and possessions protected in bankruptcy—are designed for the general population, and so may sometimes not be adequate to protect all of your assets. And what you do own—such as your home, vehicle, furniture—may be extra valuable to you, because they help keep you safe and independent. Also, unlike younger folks, you have less potential to increase your income and candidly don’t have another lifetime to gather more assets, if you were to lose anything now to your creditors. So protecting what you own is very important.
Everything you own may in fact be well-protected in any kind of bankruptcy. Assets are valued in terms of fair market value—generally what a ready and willing buyer would pay. So if something has special value to you—the reliability of your older vehicle, the comfort you get from your home’s furnishing, the artwork created by a dear friend, a family bible—that personal value generally doesn’t count. The exemptions you are allowed may well be more than adequate for protecting everything you own. If you have concerns about losing anything to your creditors, you may be worrying unnecessarily.
2) The Chapter 13 Option:
Chapter 13, the “adjustment of debts” version of bankruptcy, can protect your non-exempt assets, although that often involves paying something to your creditors in return. However, if you owe certain kinds of debt that must be paid regardless of filing bankruptcy—such as relatively recent income tax debt—you may be able to protect what you own without paying anything more than you would have otherwise. Entering into a Chapter 13 case does entail some risks. For example, you must complete the three-to-five year procedure to get a discharge (legal write-off) of those debts that are getting discharged. On the other hand, if your income is very consistent—such as Social Security or some other kind of retirement income—that eliminates one of the main risks. You need to weigh all of your options with your attorney before deciding that Chapter 13 is the best for you.
3) Asset Protection Strategies:
If you DO own anything that is not well covered by the exemptions, there are usually ways to protect those assets BUT you need to be extremely careful about this. There are many seemingly common sense ways of trying to protect assets that can seriously backfire. So this is an area in which you definitely need to get solid legal advice.
An attorney can help you with “asset protection” procedures either to position you favorably for filing bankruptcy, or to avoid the need to do so. This generally involve transferring assets from non-exempt into exempt ones over time, and other similar efforts. But each step must be done very carefully to not cause future problems. And many of these procedures involve some risk. So “asset protection” should absolutely not be done without the very specific guidance of an attorney experienced in this area.
In the next blog we cover asset issues regarding 1) protecting retirement accounts, 2) retirement money sitting in your personal accounts, and 3) reverse mortgages.