Florida Asset Protection Law Blog | Attorney Jon Alper

Civil judgments awarding money damages cannot be enforced until the court issues the judgment creditor a writ of execution. The creditor needs the writ of execution to being using collection tools such as garnishments and levy. Most money judgments include in the judgments the phrase “for let execution issue” which gives the judgment creditor the necessary writ to enforce the judgment.

A debtor has 10 days after the court signs the judgment to request a rehearing. Rehearing is not usually granted, and if granted rarely results in a modification or reversal of the judgment. Nevertheless, for 10 days after the judgment, until the time for rehearing ends, the debtor has some time to rearrange his assets. For example, when the creditor knows because of their prior relationship where the debtor banks a debtor can move money from his current bank account to a different bank to avoid immediate garnishment.

Savvy creditor attorneys have a tool which permits immediate collection and garnishment as soon as the judgment is signed so the debtor does not have a 10 day window to avoid collection. The creditor can submit a proposed judgment order that authorizes the writ of execution simultaneously. If the court’s judgment contains the phrase, “for let execution issue forthwith (or immediately)” the creditor can employ collection tools, such as bank garnishments the same day the judgment is signed. The debtor still has 10 days to request rehearing, but the creditor’s collection efforts do not wait for the 10 days.

 

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On occasion I receive calls from people requesting asset protection advice so they can escape legal responsibility to pay their former spouse money owed them as a result of their divorce. Asset protection planning mostly protects against judgments in civil litigation other than family matters. Whether asset protection planning protects against family law liability depends on the nature of the family law obligation; some family law judgements are treated the same as civil money awards and other family law obligations may be enforced with stronger measures including contempt and imprisonment. Asset protection planning, for the most part and with few exceptions, cannot protect you from being held in contempt of court.

The general rule is that family law judgments awarding a property settlement and equitable distribution of marital property is enforceable as a general civil judgments and the recipient has available the same execution tools as any other civil creditor. Asset protection tools can thwart the collection of equitable distribution awards. Family law judgments awarding money for alimony and support of the ex-spouse or children are given higher priority under our law. A former spouse may be held in contempt of court for not paying alimony or support provided he or she has the assets to pay the judgment. Assets exempt from execution of civil judgments and equitable distribution collection are not exempt nor excluded when the court evaluates the defendant’s ability to pay.

Asset protection planning is not designed to help you avoid paying alimony and support judgements.
       
 

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People should be able to protect from their creditors  their life insurance policies and death benefits payable to their heirs. Sometimes people make simple mistakes which expose large amounts of life insurance money.

Florida law protects cash value of life insurance you own on your own life. Upon your death the life insurance proceeds payable to your named beneficiary is also exempt from your creditor. The same death benefits may be exposed to your beneficiary’s creditors, but the proceeds are not exposed to your own creditors.

One of my clients had a $1 million life insurance policy without a named beneficiary. He had named his former spouse as the beneficiary, but they got divorced and the client had not substituted a new life insurance beneficiary. If this person were to die his life insurance would be payable to his probate estate. Probate assets are not exempt from creditors. In effect, unless this client names a beneficiary, or alternatively, transfers his policy to a life insurance trust, he may be paying life insurance premiums for the benefit of his creditors.
 

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A judge has broad equitable powers to enforce judgments and recover fraudulent transfers. Suppose a debtor moves money and other financial assets beyond a creditor’s reach making more difficult for the judgment creditor to recover the assets to satisfy the judgment. Several clients have asked me whether a judge can simply order the debtor to bring back to assets and assign the assets to the creditor, or whether a judge simply can order the debtor to write a check to the creditor. If the debtor does not comply with the judge’s order to pay the creditor, can the judge hold the debtor in contempt and incarcerate the debtor until he pays?

The answer is that generally speaking judges cannot order debtors to give assets to their creditors and hold the debtor in contempt for non-compliance. The Florida Constitution prohibits imprisonment for failure to pay debts except in the case for fraud. Florida courts have ruled in many cases that a court can use contempt powers to enforce defendant’s duties and actions, but contempt is not a remedy to enforce payments of debt.
 

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The Florida Constitution’s homestead protection does not exempt and protect homes acquired or improved with funds obtained by fraud or other egregious acts. Homestead protection is not available to bad people who have done bad things to get money, and who have invested their ill-gotten money in their homestead. Creditors can get an equitable lien on the debtor’s homestead to the extent the debtor purchased or improved the homestead with money obtained through fraud or egregious conduct.

I encountered a case where a man defrauded some investors for about $500,000. After the got the money he got married. His wife was ignorant of the husband’s fraud; she had nothing to do with the investors. The husband and wife moved to Florida and purchased a homestead using the $500,000 proceeds procured through the husband’s wrongdoing. The husband died, and his wife inherited the homestead. The investors sued the husband’s estate and got a judgment. The investors tried to impose an “equitable lien” on the homestead because it was purchased with proceeds of fraud and other egregious acts of the husband.

The question is whether the creditors can impose an equitable lien upon the wife’s homestead inasmuch as the wife was not involved in her husband’s wrongdoing. My initial review of the law suggests that the creditors can impose an equitable lien on the homestead of the innocent spouse. Even if the wife did nothing fraudulent she was still unjustly enriched through the husband’s actions and is not in a position to benefit from her husband’s acts through homestead protection. If the wife put any of her own money into the house she would probably be permitted to recover her equity. I think a court would permit a creditor to foreclose an equitable lien and force the spouse out of the homestead.
 

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My work for one of my clients involves this interesting question about bank garnishments. Most people bank at local branches of traditional banks, such as Sun Trust, Bank of American etc. A judgment creditor can garnish funds in any of the debtor’s bank accounts by serving a writ of garnishment on the bank. One of my clients banks only at so-called “internet banks” such as ING Direct  Bank or Ally Bank. These internet banks typically offer money market and saving accounts with limited check privileges.

The question which came up is how and where does a judgment creditor garnish an “internet bank account” when the internet bank has no branches in Florida. ING Direct has branches in six states other than Florida, for example. Can the creditor serve ING Direct a write of garnishment from a Florida court, or does the creditor have to domesticate the judgment in a state where ING Direct has a branch?  Is an internet bank like ING Direct subject to garnishments in any state because internet banks, by doing business over the internet, is does business everywhere its customers reside?

 

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Over the past year I have commented more than once that although the large national banks had generally not pursued deficiency claims on first mortgage foreclosures that smaller regional banks were becoming more aggressive. This week I spoke with a new client who had been sued for a deficiency judgment after foreclosure of first mortgage loan issued by First Priority Bank of Bradenton, Florida. Actually, after the mortgage loan went into default the FDIC closed First Priority Bank and sold the bank assets to an investor group. It is the investor group which is aggressive pursuing collection of the mortgage debt.

I am not sure why the smaller banks are so much more intent on chasing homeowners for deficiency judgments. Maybe the smaller local banks did not participate in the mortgage securitization program and held more loans in-house rather than selling them to Wall Street. Or, perhaps each loan in default represents a significant percentage of their bank assets. Whatever th reason, my observation is that the smaller the mortgage lender the greater is the borrower’s exposure to personal liability from a strategic mortgage default

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