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

I have recently posted blog articles about a client who is trying to protect money from a judgment creditor by overpaying estimated taxes to the IRS, and when a refund is due from the next tax return, asking the IRS to hold his refund to pay future taxes. I had mentioned that an experienced collection attorney I consulted had no idea how he could attack a debtor's excess tax deposits with the IRS. Another collection attorney in Florida emailed his suggestion that the creditor could seek proceedings supplementary with a Florida court and ask the judge to use the broad equitable powers granted courts by the relevant statute to command the IRS to turn over the debtor's tax deposits to the court. A bankruptcy professor did not know the answer and suggested speaking with a tax attorney, which I did.

This week I presented to issue to Mr. Robert Kramer who is a very experienced and well known tax attorney in Broward County, Florida, where he heads his own firm, Kramer, Green, Zuckerman et. al. Robert Kramer has been a tax attorney for several decades and has also provided asset protection planning for many physician clients. Robert said that a general judgment creditor cannot garnish the IRS to collect a civil judgment in the absences of specific statutory authority; such authority exists, for example, for collection of state child support awards. Also, Robert stated that a state court judge cannot enforce an order against the IRS for turnover of taxpayer money to collect a civil judgment because the state court judge lacks federal jurisdiction, and there are no federal statutes giving such power to state courts to collect general civil judgments. In other words, the Florida judgment creditor may have no remedy to get money the debtor transfers to the IRS to avoid his creditors.

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Everyone knows that it is very hard to negotiate with a bank to modify a bank loan. Banks are difficult creditors to deal with. Yet, after a bank which has already sued and has a judgment against you is a relatively easy creditor. Banks tend to accept very low settlements of judgment debts whether the debt is related to a mortgage, a credit card, or a commercial loan. I never understood why banks tend to settle for "pennies on the dollar", although I assumed they had good reasons to resolve their claims quickly and cheaply. This past week I discussed bank settlement policies with a new client from Chicago who had worked there for the FDIC for many years. He was quite familiar with the internal workings and thinking of commercial banks.

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Often new clients describe asset protection tools they implemented before they first meet me. Their asset protection solutions are usually based on a book they read, a seminar they attended, or even things they read on my own website. Usually, the client's asset protection strategies will not work because they lack knowledge or experience with important issues, but sometimes I meet people whose own asset protection plan includes creative and possibly effective strategies. As an example, last week a new client described to me how he has already protected approximately $75,000 of cash by overpaying his estimated tax payments. His IRS account showed a positive and refundable balance of $75,000. The client assumed his creditors could neither discovery nor recover his money held by the IRS. At first, I told the client his plan would not work because his credit with the IRS was a non-exempt asset and would have to be disclosed. But upon further investigation, his ploy may be effective.

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Money received from the sale of a homestead is exempt from creditors so long as you are holding the money to buy a replacement homestead and as long as the sales proceeds are segregated. If you decide to downsize your homestead and use only part of the money to buy a house, can you use the rest of the sales proceeds to buy a protected annuity? The general rule is that using exempt assets (homestead proceeds) to buy another type of exempt asset (annuity) is not a fraudulent conversion. Because the homestead sales proceeds are exempt when you intend originally to reinvest all into a new house it may seem that you can safely use any portion of a homestead account to buy any other exempt asset. Or, do homestead proceeds lose their protection when invested in anything other than a new homestead.

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Many people, if not most people, facing a foreclosure or bankruptcy are very concerned about the impact on their credit rating. Clients frequently ask me how will the foreclosure, short sale, or bankruptcy affect my credit and how can they rebuild credit. Credit rating is not a legal issue; I don't know any legal procedures relevant to credit restoration. From time to time when one of my own clients is in the mortgage underwriting business or car lending business I pass on to my clients or blog readers what these people tell me about credit rating.

This past week the Wall Street Journal published a clearly written article about credit scores. The article summarized the important factors affecting credit score and gave practical suggestions about increasing credit rating. Those concerned about the impact on credit rating of their current financial difficulties should read this article. Credit Scores: Shattering Some Common Myths

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