Like many states in the U.S., Wisconsin has laws that allow forfeiture of assets in the event of bad debts. Often, individuals who do not manage their credit well become victims of asset forfeiture by the creditors. However, there are certain methods that may assist a debtor in protecting their assets from being forfeited. Asset protection planning is something that people may need to do during the good financial periods, so that during the bad financial times, they can retain his or her assets.
It is also important to note that asset protection is meant to protect the debtor’s assets and also to ensure that the debtor does not end up in jail for bankruptcy fraud. Thus, it is obviously better to start planning early and not when a crisis is about to occur. Asset protection methods should be undertaken before a claim is made by the creditors, otherwise, the steps taken may be nullified under fraudulent transfer law. The debtor may also have to pay the creditor’s attorney fees and may also not be able to declare bankruptcy.
It is wrong to assume that asset protection is a substitute for liability and professional insurance. It is actually a supplement for all such insurance policies. Contrary to popular belief, asset protection doesn’t pay legal fees to defend lawsuits; when supplemented by insurance policies, asset protection plans may help a debtor come out of a fraudulent transfer claim and the insurance company may pay for the defense against the lawsuit. The insurance companies may also pay the settlement, provided that all of the premiums were paid on time.
For individuals who own their own business, they should not assume that their business entity is a personal financial resource. Therefore, it is best to avoid putting personal assets into a business entity. Such actions may compel the creditor to consider the business entity as an alter ego of the debtor and initiate necessary action. The ideal way is to put personal assets in a trust as there are legal bodies that protect the trust assets.
Those dealing with asset forfeiture issues may want to consider what options they have regarding asset protection. Debtor may wish to consult a lawyer in order to understand asset protection law clearly so he or she can make informed decisions regarding their situation.
Source: Forbes.com, “Ten Rules for Asset Protection Planning,” Jay Adkisson, July 13, 2011