Alienation of Assets
In commercial terms, the world revolves around bankruptcy. Bankruptcy is a process in which a person's inheritance (ie the totality of a person's assets) is liquidated to meet the total debt that has grown beyond his capacity. Bankruptcy procedures are problematic because they mean the liquidation of personal assets such as someone's home and car. Unfortunately there are several ways to avoid bankruptcy, which usually occur through poor judgment or 'bad luck'. Fortunately, there are many ways in which the potential implications of bankruptcy procedures can be minimized to prevent the loss of assets. For ordinary people, this can involve certain minor legal procedures that can ultimately save a lot of money. For creditors, this can be bad news. In this article we will look at a completely legal way in which you can potentially avoid losing assets in bankruptcy procedures.
If you run a small business, or are likely to do so in the next decade, you must immediately act as follows to protect your assets. Or, if you see yourself hoarding significant debts without collateral in the years to come, you also have to act similarly. Leaving a ten-year margin, which may seem overwhelming, will prevent any challenges in absorption and ensure that the assets you have 'transferred' are no longer part of your inheritance. Alienation ensures that the assets from which you will still benefit cannot be accepted by your creditors with consideration for every debt you get.
The first thing to consider is combining a limited liability company, or even several, where to accommodate your business operations. Running your business through a company can mean more documents, but also removes you personally from all obligations. Of course, your company can still be liquidated, but we will look for ways to avoid losing your business assets immediately. If you choose not to run through a legal entity, there are still ways in which you can minimize the potential for loss of your assets.
The biggest and most valuable asset we will have is our home. It shouldn't be surprising that this is the number one target for many creditors. If you are married or live with a partner, it is impossible for you to lose your house in the bankruptcy process. As long as you give enough time (ie 10 years), you can transfer ownership to your partner, so that the asset is no longer yours. You can then agree to negotiate with your partner to continue to stay at home, most of which will become mere formality. In the end, you no longer have a house legally, but functionally nothing has changed. Or, you can set your property by creating trust where you and your partner become beneficiaries. What you need is to involve a third party (even potentially as your partner) as a trustee, before you will alienate the asset. Again, functionally, you still stay at home, and it's still your home. The only difference is that creditors cannot touch it if the worst thing happens.
If you choose to run through a limited company, your first step must be to establish at least one other company, which will act as the parent company. The parent company must then become the owner of all business assets, before effectively renting back to another company. The effect is theoretical. You have both companies, you have assets, but if the creditor tries to attack your main trading company, there will be no chance of losing your business assets. Leasing agreements between the two companies will also be theoretical, and will only require small accounting procedures to provide legal validity. As long as you make sure your parent company avoids debt, there should be no problem in alienating your entire business legacy.
There are several ways in which you can avoid the possibility of losing your assets due to bankruptcy. Why not consult a specialist legal counsel for more specific information for your jurisdiction to help ensure total protection from all your ways.