How to Protect Stock Funds in a Bankruptcy
Bankruptcy protection, although a very important legal device in the United States, does not allow you to shield all of your assets from your creditors. Nevertheless, the bankruptcy laws permit you to exempt certain property from distribution to creditors in bankruptcy. One important asset that you may wish to protect is your stock portfolio. The only way to protect your stocks is to properly exempt them under a federal or state exemption law.
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Instructions
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Review the exemption laws in your state of residence. Generally, non-retirement stock funds are not usually exempt under a separate category, but usually under a catch-all category. This catch-all is often called the wild card exemption. The amount of this exemption varies from a few hundred dollars to upwards of $10,000. You must indicate the amount of exemption for your stock under the wild card on the "Schedule C" of your bankruptcy petition.
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Review the federal exemption laws. Non-retirement stock funds are exempt under the federal wild card exemption up to $975, and up to $10,000 if you have not claimed a homestead exemption.
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Determine whether the stock funds are related to retirement. If stock funds are held in a 401(k), IRA, or similar retirement account, the stocks are exempt in an unlimited amount under both state and federal exemption laws. If the stock funds are not held in a retirement account, they are only exempt under the wild card exemption.
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Tips & Warnings
This article does not constitute legal advice. See an attorney.
