When living in fear of debt and potential financial collapse, we all think of ways out. Perhaps, you thought about bankruptcy, but are afraid you will have to start over again after. This may lead some New Yorkers to wonder if they can just transfer everything they own into a trust, and then file bankruptcy. The idea is that those assets might be protected in the trust.
Can a trust protect me?
Yes and no. If you created a trust years ago for estate planning purposes, and then fell on hard times, depending on how long ago you created the trust and the type of trust, it could be protected from bankruptcy. However, if you create one now, transfer assets, and then file for bankruptcy, this will likely not work.
The second example above would likely not work because of the bankruptcy look-back periods. For most transactions, there is a two-year look-back period, in which the bankruptcy trustee will see if that property should have been part of the bankruptcy. Depending on the state where you file, the transactions and the type of trust, the look-back period could be a decade.
You may not need to worry about losing your stuff anyway
For those filing Chapter 7 bankruptcy in New York, the exemptions will likely protect most, if not all, of your stuff, like your home and car. Chapter 13 bankruptcy also has exemptions too, so you may not even need to “hide” anything.
Google is an amazing tool because it can help answer questions you did not even know you wanted answered. Unfortunately, solving debt problems with Google alone is not usually helpful. This is where a Westchester County attorney can help you sift through your options to find solutions, whether it is a trust, bankruptcy or some other solution.