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Ought to I switch my residence into an llc (restricted legal responsibility firm) to guard it from collectors earlier than I file for chapter?


In case you are assembly with an asset safety lawyer, and he’s advising you to switch varied belongings and properties into an llc, or into some type of belief, you then’re in all probability not an excellent candidate for chapter anyhow. You want a distinct type of lawyer for a distinct type of case.

In chapter, I can defend varied belongings underneath state exemptions that exempt (defend) your belongings. For example, underneath Utah legislation, we will defend $3,000 of the fairness in your automobile from collectors, 100% of your meals storage, and $45,100 of your private home’s fairness underneath the Utah Homestead Exemption. However, and it is a massive BUT, I can solely defend property that has your title on it.

So in case you switch the house out of your title and into an llc, the llc can’t declare any type of exemption within the worth of your private home. And in case you personal the llc, you then now personal an llc that owns a house with no homestead exemption.

And now you’re considering, “however what if I switch the property into an llc that’s owned by another person?” Nicely, it is a fraudulent switch. A “fraudulent switch” is whenever you switch possession of one thing for lower than truthful worth. So in case you give your private home to an llc in your buddy’s title, and also you obtain no truthful compensation, that matches the definition. The bk trustee can then “keep away from” that switch and put the property again in your title. Nonetheless, since your title wasn’t on it whenever you filed the case, you can’t declare the homestead exemption.

Both approach, you shot your self within the foot to the tune of $45,100 of fairness that you might have protected in case you stored the house in your title. The trustee may wish to promote your private home to money out that fairness.

Simply yesterday, I had a possible consumer name who had about $300,000 of fairness in his residence. He additionally had at the least $200,000 of offended collectors threatening to sue him. Due to the fairness in his residence, he transferred it to an llc he had simply created, and recorded the switch with the Salt Lake County Recorder. He did this on Monday after which referred to as me on Tuesday. When he referred to as me, he was feeling fairly happy with himself.

I informed him that I couldn’t assist him. The potential fairness problem in his residence was unhealthy sufficient, however whenever you throw in fraud, that’s not my type of case.

If you wish to defend your belongings, it is best to discuss to an lawyer earlier than you do something as drastic as transferring possession to somebody or one thing else.



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