Although bankruptcy is not necessarily a desirable course of action, it has lost much of its traditional stigma, and is now sometimes used as an asset protection device. By filing a bankruptcy petition, you can stop all action being taken by your creditors. However, the timing is crucial when filing a bankruptcy petition, especially if you want to protect certain assets. Although you may want to quickly stop creditor harassment, be aware that a hastily filed petition may work to your detriment. Knowing how bankruptcy works can be extremely useful in protecting your assets.
Prior planning is essential before a petition is filed.
Any transfer of assets made within 90 days of filing a bankruptcy petition may be voided, and thus subject to the claims of creditors. You should make any transfers, and then hold off filing the petition for the requisite 90 days, thus preventing the property from being recaptured in the bankruptcy estate. To prevent benefiting insiders unfairly over other creditors, the bankruptcy code has extended the avoidance period in this case. Before you decide to file for bankruptcy, you need to consider the timing of transfers which have been made, transfers which you are contemplating, and current creditor activity. By having a good assessment of your estate, you can determine an appropriate course of action prior to filing the bankruptcy petition.