Proposed US Bankruptcy Law Overlooks Domestic Asset Protection Trusts

by Glen Shapiro, LawAndTax-News.com, New York

03 March 2005

According to a New York Times report published on Wednesday, the new bankruptcy legislation currently under discussion in the Senate may allow wealthy individuals to shelter their assets from creditors via domestically-based asset protection trusts.

The NY Times revealed that such trust arrangements established in Alaska, Delaware, Nevada, Rhode Island and Utah are likely to benefit from a 'loophole' in the proposed law which exempts from bankruptcy proceedings assets governed by "applicable nonbankruptcy laws".

"This is just a way for rich folks to be able to slip throught the noose on bankruptcy, and, of course, the double irony here is that the proponents of this bill keep pressing it as designed to eliminate abuse," Harvard Law School professor, Elizabeth Warren told the newspaper, continuing: "Yet when provisions that permit real abuse by rich people are pointed out, the bill's proponents look the other way."

However, when contacted by the New York Times, the office of Senator Charles Grassley (R-Iowa), the main sponsor of the bankruptcy bill, explained that he was unaware of the fact that the planned legislation exempted domestically-based asset protection trusts.

"The senator is always open to suggestions for closing these loopholes," press secretary, Beth Levine announced.

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