Using Cash Credit Cards To Hide Cash From Creditors
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.
There is nothing illegal about a judgment debtor using after tax money to buy a card. However, the same debtor will commit a crime if he denies having such a card when a creditor examines him under oath about his assets. Therefore, for this cash hiding strategy to work the debtor probably has to lie about it at some point in the judgment collection process. A creditor will ask the debtor to reveal any and all assets whether or not specifically identified by the creditor attorney. Although many people will think its impossible for a creditor to discover such cash cards, there are always witnesses to the purchase and use of a cash card and a skilled creditor attorney or his investigators may find evidence of cash purchases. Another issue is that people become tempted to use this same tactic to hide cash income from the IRS. Asset protection is not unlawful, but tax evasion is a serious crime.
From my clients reports I know that people are using cash cards to hide assets. I am wary of any asset protection tool that involves hiding assets because I do not think there are any more secrets in today's world. There are enough legal asset protection tools in Florida that people can effectively protect their assets without having to hide or lie about what they own.
posted by Jonathan Alper, asset protection and bankruptcy attorney, Orlando, Florida
Whats the purpose of buying the card? Why not just hold the cash. I dont get how this hides income.
I would guess this method would be better used to substitute for a checking account. Thereby limiting the chance of a bank levy. The MC/Visa branded debit cards can be used to pay bills online, and whatever you can't pay with them, you can buy money orders. You can even have your income direct deposited on to them. Most of these cards are backed by distant, likely out-of-state banks, so a judgment creditor would have to jump through hoops to levy one of them.