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Can a Trust Protect My Assets if I Declare Bankruptcy?

A trust can protect your assets if you have to declare bankruptcy, depending on the type of trust you have. Assets in revocable living trusts can be seized by an individual's creditors if he or she files for Chapter 7 bankruptcy. Assets in an irrevocable trust cannot be seized. This is because of the difference in the assets' ownership in each of these trust types.

Generally, individuals set up trusts to keep their assets out of the probate process upon their deaths. A trust allows an asset to transfer directly to a beneficiary without subjecting it to the costs and complications of probate, the legal process of determining beneficiaries and transferring a deceased individual's assets to them. Individuals also sometimes create trusts to lower their beneficiaries' estate tax burdens. Below are deeper explanations of each type of trust and what can happen to the assets contained within if you file for bankruptcy. For further information about each type of trust and how it can benefit you, speak with your financial adviser or your bankruptcy lawyer.

Revocable Living Trusts

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Although its stores in the Chicago area remain open, Boston-based fast casual sandwich chain Cosi has filed for Chapter 11 bankruptcy. In total, 29 of the company's 74 corporate-owned locations were closed in September 2016. In addition to these corporate-owned stores, there are 31 franchise Cosi locations in the United States. All of these locations are still open. The goal is for Cosi's lenders to purchase the eatery and reorganize it under a Chapter 11 bankruptcy plan.

Chapter 11 bankruptcy is designed to give companies the opportunity to restructure their operations to become profitable again. Although bankruptcy is not the right choice in all situations where a business owner is facing a substantial amount of debt, it can be the right choice for many. If you are considering filing for bankruptcy, speak with an experienced bankruptcy lawyer before you proceed.

Hard Times for Cosi

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For two years, Caesars Entertainment Corporation has been in and out of court with creditors over who must pay to repair the company's operating unit, which cannot repay its $20 billion debt on its own. As of September 2016, it appears that Caesars' bankruptcy battles could soon be over.

The current offer is $5 billion in cash, new debt, and stock in a reorganized version of Caesars Entertainment Corporation. Creditors in New York have until midnight on September 24th to accept or reject the deal, which could make or break the future of the company. If this offer is accepted, the company's senior leaders will have to give up certain concessions they won at earlier stages of the negotiation process. These concessions amount to hundreds of millions of dollars. The company hopes to reorganize and become profitable again, as is the case with all companies that file for Chapter 11 bankruptcy. However, this is not always possible. Sometimes, a company simply cannot be saved due to overwhelming debt, an inability to reach an agreement in bankruptcy court, or a lack of consumer demand for that company's product or service.

Difficulty Attracting Casino Visitors

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Hanjin Shipping Company Bankruptcy Leaves Ships Stranded at Sea

South Korean shipping giant Hanjin Shipping Co. filed for bankruptcy in August 2016. Since its filing, the company has run into many issues with ports around the world. Many refused Hanjin ships access to their docks, leaving ships and their cargo stuck in the ocean, waiting for further instruction. In many of these cases, the ports refused the ships' access because they feared Hanjin Shipping Co. would not pay them for the use of their properties.

Bankruptcy can leave workers at all levels of a company feeling like they are “in limbo.” This feeling can extend to all parties who do business with the bankrupt entity, such as its vendors, its partners, its customers, and its shareholders.

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Exploring Your Bankruptcy Alternatives

When you feel like you cannot get your personal debt under control, filing for bankruptcy can be an attractive option. For many individuals, bankruptcy is the key to having their debts discharged and moving forward with their lives. Although bankruptcy can be a great tool, it is likely not your only option. Depending on your circumstances, you might be better suited to one of the bankruptcy alternatives discussed below. Never make a decision about filing for bankruptcy without first discussing your situation and your options with an experienced bankruptcy lawyer. You could have more options than you realize.

You Might be Able to Consolidate your Debts

When you have a lot of debts to pay off, one of the challenges you face is simply keeping each payment's due date and required amount straight. A way you can make this easier for yourself is to obtain a debt consolidation loan, which is a single loan that pays off all your existing debts, leaving you with only the one loan to repay. Typically, these loans take two to five years to repay through fixed monthly payments.

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