Bankruptcy is a Form of Asset Protection

Asset Protection

Table of Contents

Most people file for bankruptcy protection to eliminate debt or restructure payments into an affordable plan. The ability to get a fresh start or rearrange your budget to make debt servicing affordable is a very reasonable basis for filing. But bankruptcy is also about protecting assets.

Before filing for bankruptcy, most people exhaust every other option – borrowing from family, selling property, and even liquidating retirement accounts. We understand the reasons for trying to avoid bankruptcy and the stigmas that follow. But for those who go through these steps and file for bankruptcy, there will always be some remorse and regret for not filing for bankruptcy protection sooner and keeping those assets.

Anyone who contributes money into a retirement plan like a 401K knows how long it takes for that plan to build-up to the point where you can afford to retire and live off of those funds. If you contribute $100 every biweekly paycheck for 40 years, you’d end up with just over $100,000. That’s good money, but that wouldn’t last long, even if supplemented by social security.

This is why the federal government and our states have created exemption schemes to protect property from creditors. Every state is different and some allow you to choose the federal scheme or choose from the federal or state scheme. Kansas and Missouri residents who have lived in their state for over 2 years have to choose their state’s protections. Kansas has unlimited homestead protection (in most cases) and very generous protection on equity in a motor vehicle. Missouri is much stingier on home and car equity but has “wild card” and “head of household” protections that can often protect cash, tax refunds, and other assets that would otherwise need to be turned over to bankruptcy trustees.

Bankruptcy is a form of Asset Protection

Critically, every system acknowledges that qualified retirement accounts are exempt from collection by creditors. That means you should NOT listen to creditors when they tell you to liquidate your accounts or borrow from the accounts to pay the creditors. If you’re at that point, please contact us to speak with an attorney who understands the bankruptcy system, your exemptions, and your ability to eliminate or restructure debts while preserving your property. Your future self will thank you for it. For more information on bankruptcy or asset protection, visit us at or call us at 913-422-0909. At WM Law, we are here to help!

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Jeffrey L. Wagoner


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