Any attempt to shelter assets during a financial crisis will be tested far more severely than similar actions while times are good. In particular, transferring property or funds after a lawsuit has been filed, or shortly before filing bankruptcy, can create certain presumptions that will eliminate the effectiveness of the asset planning. Plan ahead--if and when the hard times come, your motives will be difficult to question.
Familiarize yourself with state exemption laws.
Every state has its own list of exemptions. For example, Kansas allows every individual to exempt most household goods and furnishings, $1,000 of jewelry, $20,000 of equity in a vehicle, an unlimited amount of equity in a "homestead", and much more. Each state is different--in some cases, radically different. Contact an attorney licensed in your state and familiar with these laws. They will be able to assist you. Additionally, there are certain types of property that the federal government effectively places beyond the reach of creditors, such as most retirement accounts covered by ERISA (e.g. 401(k) accounts).
Allocate your property accordingly.
Consider how best to take advantage of your state exemptions. If you live in Kansas and you own a $50,000 car without any loans, consider taking out a $30,000 loan against the car, or selling the car and getting a $20,000 vehicle. Since Kansas limits the exemption to $20,000, the remaining $30,000 in equity is vulnerable to creditors. Thus, that amount of equity should be converted into something else. The possibilities are numerous. For example, you could place some of the funds into an IRA. You could completely furnish (or re-furnish your home). Or, you could pay down your mortgage by $30,000. Each of these things increase the total amount of equity you possess in exempt assets. That means you have $30,000 fewer dollars available to your creditors.
Do not make any rash transfers.
One of the most common mistakes (and I do mean COMMON) is for people to transfer assets when they get in trouble. The following are examples I see all the time:
1. Giving money or property away to family and/or friends.
2. Paying off debts owed to family or friends.
3. Taking cash advances shortly before filing bankruptcy.
4. Withdrawing funds from retirement accounts to help pay for mounting debt.
Each of these can wreak havoc on proper asset and exemption planning, especially if a bankruptcy looms on the horizon. Even when financial difficulties are closing in, asset and exemption planning is both possible and legal. However, it is critical to retain knowledgeable counsel to assist you in making these choices.