In 2008, the United States Court of Appeals ruled that 11 U.S.C. 522(o) still allows for pre-bankruptcy exemption planning. The case is know as In re Addison 540 F.3d 805 (8th Cir. 2008). 522(o) was added to the bankruptcy code as part of BAPCPA , the 2005 revision of the bankruptcy code and it was feared that this would greatly reduce or even eliminate the ability of Debtors to perform pre-bankruptcy exemption planning.

What exactly is pre-bankruptcy exemption planning? Pre-bankruptcy exemption planning is the process of converting non-exempt assets to exempt assets, thereby keeping them from being seized by the Trustee when a Chapter 7 Bankruptcy is filed.

In the Addison case, the Debtor, transferred $8,000.00 into an IRA account three month prior to filing and made an $11,500.00 payment on his mortgage the same day he filed bankruptcy. These funds had come from a brokerage account, which was not exempt. The Court of Appeals found that there was no intent to hinder delay or defraud his creditors. As such, the IRA and the increased equity in the home were exempt.

Perhaps you’ve received a large tax refund, inheritance or personal injury settlement. Although you may have a large sum of money, it may not be enough to pay off your creditors. If you find yourself in this situation you should speak with an experienced bankruptcy attorney about your options and the availability of pre-bankruptcy exemption planning.

For further information regarding Chapter 7 Bankruptcy or Chapter 13 Bankruptcy please call me at 314-802-8328.