Q: How can I shield (1) my house and (2) my IRA from being subject to seizure if I later file for bankruptcy?
I have not yet taken out an SBA 7(a) loan to acquire a business. If I do, the loan will require a personal guarantee. Before committing to a personal guarantee, I'd like to know how to exempt (1) my house and (2) my IRA account from seizure as part of that personal guarantee. How can I do that prior to taking out the loan?
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A:
To protect your house and IRA from potential seizure in the event of bankruptcy, it's important to understand the exemptions available under Colorado law. Your primary residence is typically protected under the homestead exemption, which can shield a certain amount of equity in your home. Ensure you formally declare this exemption when filing for bankruptcy to maximize its protection.
For your IRA, most retirement accounts are exempt from creditors under federal and state laws. However, it's crucial to maintain the accounts properly and avoid taking distributions that could jeopardize their protected status. Keep your IRA in good standing and consult with a financial advisor to ensure it remains secure.
Before committing to a personal guarantee, consider structuring your finances to limit exposure. You might explore options such as forming a separate legal entity for your business or negotiating the terms of the loan to minimize personal liability. Additionally, consulting with a bankruptcy attorney can provide personalized strategies to safeguard your assets effectively.
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