May 19, 2023
A series of blogs on Asset Protection….
Blog #1.
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During my 53 years of practicing law along with Bob’s 53 years preparing and practicing, we have seen numerous creditors’ rights issues arise over the attempt of a creditor to attach assets. We also have represented debtors where it was important to shield the debtors’ assets from the creditors’ actions. Regardless of the side of the equation, there are many issues that arise when debtors try to conceal their assets from creditors. Some of these endeavors are successful and some fail. As counselors representing both creditors and debtors, it is important to know which strategies work, and which do not. It is also important to understand how far you can push the envelope. Bob and I decided that a blog post would be beneficial to everyone considering creditors’ rights and bankruptcy issues. It is a way to discuss asset protection concerns and strategies to help achieve the best possible results. Because Bob practices in Pennsylvania, West Virginia, Florida, and New York, and I practice in Ohio, not everything will be portable to your jurisdiction. However, the principles travel well and the rules governing proprietorships, partnerships, LLCs, corporations, trusts, and fraudulent conveyances are fairly universal. We hope that this blog post will help give people ideas as to how to help debtors shield assets or creditors to find assets.
You can expect a regular post as practice and life permits. I thought the best place to start is with pre-bankruptcy planning. Here are war stories to start the process.
I had a client who was a Canadian corporation with an Ohio subsidiary. The Ohio subsidiary needed a chapter 11 filing. As we prepared for a bankruptcy filing, I saw that the Ohio subsidiary repaid the Canadian Corporation (an insider) $1,000,000.00 unsecured loan 3 months before the proposed bankruptcy filing. As a result, I told the client we had to wait another 9 months before a filing would prevent an avoidance action against the Canadian (insider) parent. The client was able to limp along avoiding a series of litigated claims until the one-year insider period expired. The client filed its bankruptcy and was able to confirm a plan without having to contribute the $1,000,000 as a preferential transfer.
On another occasion, we were able to separate two subsidiaries from common ownership, so that when the weaker of the two corporations filed for bankruptcy, there would be no common ownership to trigger pension liability for the solvent corporation.
Representing debtors and creditors attorneys need to consider many issues. Being well versed in numerous areas of the law allows attorneys to provide the best advice to their clients.
Bob and I will talk about (i) asset planning from the inception of the engagement all the way through the execution as to how to preserve assets for your client and put them in the best possible position should a bankruptcy be filed, and (ii) to discuss how a creditor can best recover assets improperly transferred. Of course, Bob and I do not have all the answers and we welcome others to contribute to the post. If you have specific questions, you can reach Bob at Rbernstein@bernsteinlaw.com or myself, Harry at Hgreenfield@bernsteinlaw.com. Bob and I are interested in hearing your stories, suggestions, and thoughts.
We have more to say about Asset Protection Planning in our next post or podcast. Stay tuned…
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