Florida Asset Protection : Asset Protection Law & Planning in Florida - Florida Homestead Exemption

People who bank at Bank of America and who have credit cards through the same bank are having problems when they don't pay credit card payments. Bank of America, more than most banks, is enforcing a provision in their credit card agreements which allows them to take money out of customers' bank accounts to pay the credit card. They are taking money without any advance notice. No client has asked me to review their Bank of American credit card documents, so I am assuming the bank has a legal contractual basis for their practice.

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There was another article on the mortgage mess in the Orlando Sentinel this week. Link: They're just walking away from homes -- OrlandoSentinel.com. The article explained that many people are walking away from mortgages on houses with no equity. The article said nothing about deficiency judgments. I believe that lenders do not want to state their liberal policy about deficiency judgments for publication in the news media, and that reporters are intentionally not addressing the issue. Nobody wants to report that mortgage lenders are not currently prosecuting deficiency claims. Any report to that effect would open foreclosure floodgates. The fear of deficiency liablity is one of the primary reasons people try as long as they can to avoid foreclosure. I recommend that people do not deplete their retirement accounts and savings to avoid deficiency judgments. Deficiency liability is unlikely, but the need for retirement security is certain and crucial to financial recovery.

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There have been some interesting comments to the blogs concerning deficiency judgments. One comment says that it is unlikely that a junk debt buyer can successfully buy and enforce a mortgage company's rights to a deficiency judgment because the secondary buyer would be reured to produce the original mortgage note. He says that owing to securitization and resalse of mortgages it is difficult for lenders and buyers of their deficiency rights to produce original notes unless they are members of organizations which serve as a repository for original documents. This person says that a debtor who lost property in a foreclosure can easily defend a deficiency suit if the bank sells its deficiency rights to a third party junk debt collector.

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As a general rule if spouse one, the debtor spouse, owns a non-exempt asset and conveys the asset to both spouses as tenants by entireties the transfer could be a fraudulent conveyance by the debtor spouse. A bankruptcy case dealt with the question in terms of the deposit into an entireties account of a tax refund when most of the refund was on account of income earned by the debtor spouse. The court said that the tax refund payable to both spouses is protected entireties money once it is deposited into the joint bank account

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Fraudulent conveyance is always the largest issue in asset protection planning. A debtor has a strong defense to a fraudulent conveyance threat if the debtor can prove that he sold or transferred an asset for value. For example, if a debtor sells an asset to a third party and receives money or property in return the debtor is left with the equivalent amount of assets and the creditor is not harmed thereby. The question often is how much money does the debtor need to receiver for a transfer of asset in order to avoid allegations of a transfer to defraud creditors.

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Under Florida law tenants by entireties property is exempt from a creditor's claim against either spouse individually. Prior entries on this blog have explained that tenancy by entireties is not a statutory exemption. Technically, tenants by entireties property is not "exempt" from creditors because it is not one of the bankruptcy exemptions listed in the Florida statutes. Instead, tenancy by entireties is a concept and an immunity created by the common law of Florida court decisions. Sometimes I have consulted with clients who currently reside in other states but are considering moving to Florida. These clients often tell me they own property in their current residence jointly with their spouse, and they want to know if the property is protected. The answer depends on whether the courts of their current residence protect tenants by entireties property from levy and execution. The answer can be tricky in some states.

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Although I have previously addressed the issue, I still receive questions about adding a spouse to the title of a currently owned checking account or vehicle to have the asset protected as tenants by the entireties. It doesn't work. Tenants by entireties ownership requires that the spouses acquire their interest at the same time during the marriage. When one spouse is added to title after the first spouse bought the asset, or opened the account, there is no tenancy by the entireties and the creditor of either spouse can levy on the property. The creditor of either spouse could reach only the interest of the debtor spouse which is most cases is fifty percent of the value. Alternatively, the creditor of the original owner could allege a fraudulent conveyance of fifty percent of the value to the second spouse acquiring an interest subsequent to the purchase.

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A prospective bankruptcy client told me that Bank of America took money from his B of A bank account without notice to pay a delinquent credit card bill. The bank did not obtain a writ of garnishment, did not have a money judgment, and had not even filed suit. He wanted to know if the bank could seize his bank account without notice.

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