Prebankruptcy Planning Law and Legal Definition

Prebankruptcy planning refers to the steps taken by a debtor to protect assets prior to filing for bankruptcy. It can either be an arrangement or a rearrangement of a debtor's property. It enables a debtor to take maximum advantage of exemptions. The best way to legally protect debtor’s assets is to convert assets that are not exempt into exempt assets. For example, modifying a nonexempt retirement account into an exempt one could shield a debtor’s assets from his/her creditors.