Hello Chris, thank you for being so helpful. I have a difficult situation. I may need to declare bankruptcy following a foreclosure in order to avoid a deficiency judgement. I own my own business which is a sole proprietership. Should I consider incorporating it in order to better separate it from my personal assets? Also if I set up a college fund for my son, would that be best as a trust with an independent trustee?
Thank you for requesting me!
1) Since you would also be the only owner of the corporation, everything the corporation owns would also belong to you, and would also be considered to be part of your assets. (If there were 2 owners of the corporation, then 1/2 of the corporate assets would belong to you.)
2) An education account would be treated the same - whether or not it was set up as a trust.
Would an educational fund be exempt or partially exempt from a Chapter 7 bankruptcy?
What state are you in?
Funds placed in an education account with one's child or grandchild as the beneficiary are fully exempt if the funds were deposited into that account more than 2 years before the Bankruptcy was filed.
Up to $5,475 of funds that were deposited between 1 and 2 years before filing are exempt.
None of the funds deposited less than 1 year before filing are exempt.
Bankruptcy Stat. 541(b)(6).
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