How to Protect Assets during Foreclosure
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Can I Protect Assets during Foreclosure?
Foreclosure can be a long, complicated process. While going through foreclosure, it is very important to protect your assets. If the sale of your home does not cover your debts, creditors may obtain a deficiency judgment. If your assets are not properly protected, you may lose much more than your home.
Ways of Protecting Assets
It is important to note that the proper legal steps should be taken to protect assets during foreclosure. This often means taking steps before the foreclosure process, let alone before something like a short sale even occurs. Transferring vulnerable assets specifically to conceal those assets from creditors is known as a fraudulent transfer and is unlawful. A fraudulent conveyance will almost always be deemed fraudulent if:
- It is well below market value
- It is done with the intent to fool creditors
- It is done without intent, but after a debtor is insolvent and the transfer will leave them with next to nothing
This means proper planning to convert assets that are liable to debt collection to those that are exempt is very important. Taking into account the proper timing, below are a number of considerations to take into account when seeking to protect assets during foreclosure.
- Increasing Assets In Exempt Accounts – what is and what is not exempt from creditors will be highly state specific. However, when homeowners start finding themselves in over their heads with mortgage payments, there is no reason to sacrifice a comfortable future in retirement. Thus, rather than investing in priceless cars, collectible or a vacation home, increasing payments into retirement accounts and other exempt investments would be wise.
- Creating New Exempt Investments – similarly, perhaps one way someone planned for retirement and the future was in real estate or in collectibles. If foreclosure is in the future, or perhaps just begun, it may be time to consider new plans for how the future will be funded, such as 401ks.
- Investing In Businesses – it may sound backwards, but if money is getting tighter on a mortgage, starting a business may be one way to protect existing assets in the event of foreclosure. Clearly not an option for everyone, but because certain, properly formed businesses are judgment proof, it may be the right time to start investing in and pursuing passions.
- Consider Trust Funds – certain types of trust funds, depending on the state, can protect assets for beneficiaries, such as children, grandchildren, or others. Properly setting up a trust can be time intensive and costly, but, if done properly, may be one of the better ways to protect assets during foreclosure.
Seeking Legal Advice
If you are facing foreclosure, you should consult an attorney for help protecting your assets and preparing for your future. It is important to seek legal help as soon as possible, ideally before the foreclosure process begins.
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Last Modified: 08-23-2016 10:05 PM PDT
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