The most elemental exemption planning tool is to save exempt assets while consuming non exempt assets.
It doesn’t require last minute transfers or fundamental alterations in the way assets are held. It simply requires attention to which pocket the debtor pays bills from.
Clients who receive Social Security, disability, or other forms of income that is exempt by reason of its source can use this tip. Leading up to a bankruptcy filing, the debtor should use other non exempt sources of income, or even assets that can’t be claimed exempt, to fund current living expenses, the fees of their attorney, and any fix up/catch up payments appropriate prior to filing. Leave the exempt funds untouched or make those funds the last used for necessary expenditures.
To make the situation clear to all involved, the debtor should segregate the exempt income so that it can be traced from exempt source to the account in question.
Depending on the marital property laws of your state, this principle may work in cases where a non filing spouse has property that doesn’t come into the bankruptcy estate. Again consume the cash that would otherwise be property of the estate if existing at filing, and save the separate or excluded property.
Remember that the federal, non bankruptcy exemptions apply as well to a debtor who elects the state exemptions. Become familiar with those exemptions and use them to your client’s advantage.
More on exemption planning : dealing with excess, non exempt cash
