The 8th Circuit Bankruptcy Appellate Panel ruled in favor of the debtor in Clark, Jr., Trustee, v. Wilmoth (In re Wilmoth). The debtor, after realizing that he could not possibly pay all of his debts and an $864,000 judgment against him consulted a bankruptcy attorney about what actions he should take which included a pre-bankruptcy sale of some assets.
Note to readers: The debtor did not wait until the repo man was sitting on his doorstep or his house was up for foreclosure. He took an assessment of his financial situation and immediately consulted a bankruptcy attorney once he realized that he could not possibly repay his debts.
After consulting with bankruptcy attorney, they came up with a plan to legally and fully maximize the benefits of bankruptcy. The debtor implemented the plan by selling some of his assets and paying down his mortgage so that he could take advantage of the homestead exemption in bankruptcy.
Of course, after filing for bankruptcy, the asset sale was fully disclosed to the bankruptcy trustee; but was challenged by the creditors as fraudulent. But with the help of a bankruptcy attorney who was fully aware of what the bankruptcy law allows he was able to defeat the creditors and the judge decided that there was no fraud involved.
There are few things that this debtor did correctly. First, he got real with his financial situation and when he figured that he was unable to repay all of his debts, he immediately contacted a bankruptcy attorney. Second, he did this before his situation became too desperate.
And third, he worked with the bankruptcy attorney to take full advantage of the bankruptcy laws in his favor. If you're facing mounting debts, don't delay; speak with a bankruptcy attorney today to find out how you can become debt free and save your assets.