Other Issues for State Exemptions

In Part 1 we covered when you should normally take state or federal exemptions.  Again, as a caveat, check with your Chester County bankruptcy lawyer before you do anything!  

There are are potential issues that must be considered when taking state exemptions. Pennsylvania's exemptions excludes retirement assets that were contributed within one year of filing for bankruptcy.  In addition, federal tax liens against one spouse may attach to entireties property, regardless of state law -- so says the Supreme Court in U.S. v. Craft.  

Bankruptcy Planning

Sometimes, however, it is best to plan for a bankruptcy by meeting with a lawyer well in advance.  For example, you can't commit a fraudulent transfer/conveyance by transferring the property for no consideration.  But, a transfer of the property for fair market value may do the trick.  

For example, if you owned a car by yourself (and it was work $30,000), you could transfer the vehicle for a half interest to your spouse as long as the spouse paid 1/2 the fair market value.  Then, if that transfer of funds (the 1/2 of the fair market value) is spent towards reasonable and necessary needs, then you should be fine.  

In the alternative, if there are shared/joint debts and you don't want them accelerated, you can work to pay off the joint debts and file 90 days after paying them off to avoid what section 547 of the Bankruptcy Code calls a preference.