Supreme Court Ruling Complicates Wealth Protection in Bankruptcy In a landmark decision, the Supreme Court ruled against Purdue Pharma, the bankrupt maker of OxyContin, in a case that has profound implications for wealth protection in bankruptcy. The ruling makes it more difficult for individuals and businesses to shield assets from creditors through bankruptcy. Previously, Chapter 11 bankruptcy provided a legal mechanism for debtors to discharge their debts and reorganize their finances. However, the Purdue Pharma case focused on a legal maneuver known as the “Texas Two-Step,” which allowed Purdue Pharma to transfer its assets to a new entity while simultaneously seeking Chapter 11 protection. The Supreme Court ruled that the Texas Two-Step violated US bankruptcy law. The Court held that debtors cannot create artificial insolvency to gain the benefits of bankruptcy while shielding their assets from creditors. This ruling has several important consequences for wealth protection: * Increased Vulnerability to Asset Seizure: Individuals and businesses can no longer use Chapter 11 bankruptcy as a foolproof way to protect their assets from creditors. The Supreme Court’s decision opens the door for creditors to challenge asset transfers that are deemed fraudulent or designed to avoid liabilities. * Limited Use of Bankruptcy for Tax Avoidance: Some people used bankruptcy to avoid paying taxes. However, the Supreme Court’s ruling implies that tax debts may not be dischargeable if they are deemed to result from fraudulent or improper transfers of assets. * Erosion of Asset Protection Trusts: Offshore trusts and other asset protection vehicles may be at risk. If courts determine that these trusts were established solely to avoid creditors, they may be deemed void and the assets forfeited. Experts believe the Supreme Court’s ruling will make it more challenging for individuals and businesses to use bankruptcy as a tool for wealth preservation. Creditors will now have more avenues to pursue assets that were previously considered shielded. As a result, it is crucial for anyone considering bankruptcy to seek legal advice from a qualified bankruptcy attorney. They can help you understand your rights and obligations, explore alternative debt restructuring options, and navigate the complexities of the bankruptcy process effectively.The Supreme Court ruled against Purdue Pharma on Monday, holding that the bankrupt opioid maker cannot shield its owners, the Sackler family, from lawsuits by using a controversial bankruptcy tactic. The 9-0 decision is a major blow to Purdue and other companies that have used the bankruptcy process to protect their executives and owners from liability. It also makes it harder for wealthy individuals to use bankruptcy to shield their assets from creditors. In 2019, Purdue filed for bankruptcy as part of a plan to settle thousands of lawsuits over its role in the opioid crisis. The plan included a provision that would have released the Sacklers from all liability for the company’s actions. However, a group of states and other creditors objected to the plan, arguing that it was unfair to allow the Sacklers to walk away from their responsibility for the opioid crisis. The Supreme Court agreed, ruling that the bankruptcy court did not have the authority to release the Sacklers from liability. The decision is a victory for creditors and a setback for Purdue and other companies that have used bankruptcy to protect their executives and owners from liability. It also makes it harder for wealthy individuals to use bankruptcy to shield their assets from creditors.