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

People trying to avoid judgment creditors often try to convert assets to cash and plan to hide the cash from discovery. Clients have told me from time to time about very creative strategies to hold and spend cash off the books. One client recently explained that he could convert available cash to a Visa debit card at certain stores around town. There is no limit on the balance he can buy on his Visa card. The store charges a 3% sales commission. The client says that the store does not ask for any form of personal identification including no drivers license and no social security number. Alternatively, many department stores will sell unlimited amounts of credit cards to by used at their own stores with no fee. My client told me that such store cards are sold at establishments such as Walmart and Sams.

• Email This
• Print
• Comments (2)
• Trackbacks
• Share Link

I have previously written that some comsumer protection attorneys have told me that there are many ways to successfully defend a mortgage lender's actions for a mortgage deficiency judgment. The complexity of the modern mortgage lending has made mortgage deficiency suits and the underlying foreclosures more complex for many lenders and thereby easier to defend by skilled attorneys. Last Sunday's N.Y. Times had an article about how one borrower defended a mortgage foreclosure and was able to get the mortgage company to agree to a workable settlement. Link: Fair Game - How One Borrower Beat the Foreclosure Machine - NYTimes.com.

• Email This
• Print
• Comments (1)
• Trackbacks
• Share Link

I have often written about mortgage deficiency judgments pointing out that up to now few institutional mortgage lenders are pursuing deficiencies in Florida. Borrowers should distinguish between personal liability on first and second mortgages. When either the first or second mortgage holder forecloses the first mortgage will likely take back the property. The first mortgages gets land which eventually can be sold. The second mortgage holder gets nothing at the foreclosure sale. If the first mortgage holder pursues a deficiency judgment (and again, this is usually not the case), the borrow can defend the action in part by arguing that the mortgagee has been satisfied by its repossession of the property. The borrower does not have this defense against the second mortgage. The second mortgage, having received nothing of value in a foreclosure, can sue on the mortgage note. The second mortgage can simply demand repayment of the promissory note underlying the mortgage without going through a foreclosure proceeding. The property value is irrelevant when the lender sues to collect the note.

• Email This
• Print
• Comments (12)
• Share Link

One of my clients who has recently moved to Florida from Delaware suggested he could best protect his cash from creditors by depositing the money in his Delaware bank account. He claimed that a Delaware statute prohibited a creditor from garnishing any money in a Delaware financial institution. I know nothing about Delaware law, but this seemed too good to be true so I decided to check it out on my own time. I found a Delaware statute that states that no creditor can garnish money deposited in a financial institution in the state.(10 Del.C. § 3502.) I found case law as recent as 2007 that stated, "Under Delaware law, bank deposits are exempt, and any attachment directed at a bank is prohibited." The cases explained that the legislature's intent behind the statute was not to protect debtors from their creditors, but instead, to protect Delaware's financial institutions from interruption of their normal business operations from creditor garnishments. I found no language in the statutes or cases that limited this protection to residents of Delaware, and if true, then a resident of any state could shield their money in a Delaware bank.

• Email This
• Print
• Comments (7)
• Trackbacks
• Share Link

If you plan to walk away from a house and let your mortgage lender foreclose, do you continue to pay property taxes? This is a question often asked by homeowners who own property worth less than the mortgage balance. People are concerned that they will remain personally liable for unpaid property taxes after the bank foreclosure.

• Email This
• Print
• Comments (4)
• Trackbacks
• Share Link

A client sold his homestead and wanted to protect the money in a "homestead account" until he was able to find and purchase a new home. He called me to complain that his bank did not know how to open a "homestead account" and he wanted to know how to protect the sales proceeds. A "homestead account" is a term created through several court decisions; it does not refer to a particular variety of financial account. In the financial world, there is no such animal called a homestead account. Essentially, a homestead account is a personal bank account which is funded exclusively with proceeds from the sale of a Florida homestead. To open a "homestead account" one can open a regular personal bank account which holds homestead sale proceeds and no other money. The bank probably will let you add the words "homestead account" to the account title or description. However, if you ask a bank about a homestead account, rather than a normal personal account, the bank officer probably will not understand what you are talking about.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Can a court from another state impose a constructive trust on the homestead of a Florida debtor? This interesting question was the subject of an opinion last week from the Fifth District Court of Appeals involving one of my clients. (Case No. 07-3718) The briefest summary of the facts is that my client's former husband (deceased) was trustee of a trust for the benefit of his other family members, and he wrongfully took money from the trust to my a home in Florida for himself and my client, his then current wife. The former husband and my client lived in California at the time they bought the Florida property. A California court entered a judgment in favor of the trust beneficiaries and as a remedy the court imposed a "constructive trust" over the Florida property in favor of the beneficiary-judgment creditor. No one alleged that my client did anything wrong. My client occupies the Florida property as her primary residence. My client filed a lawsuit in Florida asking the court to dissolve the constructive trust on the grounds that the California court had no jurisdiction to impose a trust on Florida real estate and because of my client's homestead protections.

• Email This
• Print
• Comments (2)
• Trackbacks
• Share Link

I received an email from a Blog reader who asked me to post and answer the following question. Although I do not often post questions (usually because they are too long) this one is precise and interesting:

"My son (John) lives with and supports a woman (Mary) and their young children in Florida. Recently, SunTrust setoff $8000 from a bank account they jointly own for an old deficiency amount debt on a car loan in Mary's name alone. The monies in the account are from John's earnings. I know they cannot rely on tenants-by-entirety protection. Does the Head of Household prevent this set-off like it would a garnishment?"

The reader correctly points out that the bank account is not tenants by entireties because her son and Mary are not married; only married people can have entireties property. The money in the account may be protected from John's creditors as John's earnings because the question states that John supports Mary and their children. John is head of household, and earnings of a head of household are protected by Florida statute even after deposited in a bank account. However, John's earnings in the account are protected only from own John's creditors under the Florida statute earnings exemption. The earnings have no exemption from Mary's creditors.

• Email This
• Print
• Comments (2)
• Trackbacks
• Share Link

The mortgage deficiency debate continues. A prominent creditor's collection attorney named Mitch Dinkin from South Florida reports by email that in the past two weeks he has been contacted by two small to mid-size mortgage lenders regarding his representation to pursue mortgage deficiency judgments. His prospective clients express an aggressive policy to go after defaulting homeowners. Mitch's opinion is that the small lenders, rather than the larger national mortgage banks, are most likely to go after deficiency awards. He explains that if the larger lenders decide to do anything with deficiency claims they would likely sell their claims as a package to collections firms.

• Email This
• Print
• Comments (4)
• Trackbacks
• Share Link

Another attorney weighs in on the issue of mortgage deficiency judgements. An attorney friend of mine who does substantial real estate litigation told me of his recent conversation with an attorney from the Law Offices of Marshall C. Watson. The Watson law firm is one of the biggest foreclosure firms in Florida. www.marshallwatson.com. Their client list includes the biggest banks and mortgage lenders, and the lawyers practice at the center of the real estate and mortgage recession. The Watson attorney stated that his firm has received no requests from its many clients to pursue deficiency judgments after mortgage foreclosure. In this attorney's opinion, a change in policy to go after personal liability for mortgage foreclosures is not on his clients' radar screens. Some cementers to this Blog have expressed the opinion that lender policy will eventually change to pursue or assign deficiency liability. We will see.

• Email This
• Print
• Comments (12)
• Trackbacks
• Share Link

There are so many foreclosures and so few attorneys who know how to defend on behalf of the homeowner. I have referred many clients facing foreclosure to an Orlando real estate and commercial litigation attorney named David Cohen. David has had good success defending foreclosures, which often results in giving his clients extra time to remain in their homes while they attempt to resolve the foreclosure case. David recently gave me an overview of his tactics and results fighting foreclosure suits on behalf of clients, many people who were either unable to make payments or who were faced with negative equity.

• Email This
• Print
• Comments (2)
• Trackbacks
• Share Link