Posted on January 31, 2012 by Jonathan Alper

Temporary Restraining Order Freeze Against Persons Assisting Suspected Fraudulent Transfer

 A creditor cannot levy upon or freeze your assets until the creditor obtains a civil judgment against you. The creditor cannot go after your assets just because he has filed a lawsuit and you are defending the suit. That is the general rule. However, as pointed out in an article in Forbes Magazine online, written by attorney Jay Adkisson, some courts will permit creditors to freeze assets to stop potential fraudulent transfers.  

In this case, a creditor had already obtained a large civil judgment. The creditor alleged that the debtor was engaged in fraudulently transferring assets to avoid collection through companies controlled by the debtor’s family member. The court issued a temporary restraining order to freeze the assets of the entities allegedly assisting the fraudulent transfers. 
 
The case illustrates that courts will act probatively to stop possible fraudulent transfers pending the outcome of fraudulent transfer lawsuits.  Faulkner v. Kornman, 2011 WL 3503098


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Posted on January 28, 2012 by Jonathan Alper

Nevada Trusts, Delaware Trusts, and Other Domestic Trust Will Likely Not Protect You In Florida Court

 I get calls from people who have established their own asset protection plan using self-settled trusts in states such as Nevada, Delaware, and Alaska. These states have enacted statutes which protect from creditors a debtor’s beneficial interest in a trust which the debtor sets up for his own benefit- a “self settled trust.” A self-settled trust protected by state law is referred to as a domestic asset protection trust (“DAPT”)  Florida does not have a DAPT law, and generally speaking a self-settled trust in Florida does not protect the debtor’s beneficial interest even when the trust has standard spendthrift clauses. 

I have written before, but it needs repeating, that general conflict of interest law principals hold that Florida courts will not recognize or enforce the DAPT statutes enacted in other states. A Florida debtor who transfers his assets to a Nevada trust or a Delaware trust will probably  find that the Florida courts will permit his creditors to levy upon his interest in this trust. Bankruptcy courts are more likely than state courts to penetrate a DAPT. 
 
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Posted on January 24, 2012 by Jonathan Alper

Florida Head Of Household Fortunate To Avoid Garnishment Of Wages From Washington Employer

 A man called me seeking help with a wage garnishment instituted by a former business partner who had obtained a Florida money judgment related to their prior business relationship. The man lived and worked in Florida. He supported his non-working spouse and minor children. He was employed by a company based in Washington state. The company had an office in Florida. The employer issued paychecks from the Washington office.  

The creditor domesticated the judgment in Washington, and he obtained a writ of wage garnishment which he served on the employer’s home office in Washington. The employer initially garnished the debtor’s pay check, but the debtor was able to convince a Washington state judge to dissolve the garnishment writ  because the debtor’s wages were exempt under Florida law.  
 
 
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Posted on January 19, 2012 by Jonathan Alper

Head Of Household Wages Can Be Garnished By Federal Government

 I have had two different clients during this past month who were anticipating civil suits by two separate U.S. government agencies for their alleged violation of agency regulations. Both clients were W-2 employees and both clients supported people in their respective families. Both clients were “head of household” for purposes of Florida’s wage garnishment statutes. Both clients expected that  would be exempt from wage garnishment under Florida law.  

 
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Posted on January 15, 2012 by Jonathan Alper

Can Married Couple Claim And Protect Two Separate Homestead Properties?

 Some of my out of state clients want claim Florida residency to protect assets, but they really do not want to move to Florida. Some married debtors ask whether they can invest in a Florida property and claim the property as their homestead while their non-debtor spouse remain in their family home in another state. Can a debtor and his non-debtor spouse have separate exempt homesteads? 

The general answer is “yes”; married couples can have separate homesteads, but this is the exception, and it is not as easy as most people imagine. The debtor and his spouse have to be legitimately separated and living apart in different primary residences. The married couple does not have to be legally separated under state family law rules, but their physical separation has to be bona fide and not arranged to defraud creditors. Florida courts have stated that a husband and wife of an “intact marriage” cannot maintain separate legal residences for homestead exemption purposes. 
 
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Posted on January 11, 2012 by Jonathan Alper

Homestead Protection Can Be Lost If Debtor Leases For Income Part Of Homestead Property

One of my clients owns a small 1/4 lot within a municipality. There are two separate residential buildings on this small lot. The client and his family live in one building. The client leases the second building to tenant who is not a family member. The client asks me if the entire property is exempt homestead.

The issue is whether the debtor’s lease and collection of income from the second building converts part of the property to a business property rather than a residential homestead. There have been several cases over many years which have addressed this issue. I understand that under  the current law, as interpreted by the Florida Supreme Court, makes a distinction between leasing part of a homestead located inside a city and leasing part of a homestead in the county.

 

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Posted on January 7, 2012 by Jonathan Alper

IRS Can Garnish Part Of Social Secruity Check

Social security payments are exempt from garnishment under federal social security statutes. The IRS has collection remedies significantly more powerful than a creditor’s collection tools under state law. A CPA asked me the intersection of social security exemptions and IRS collections: can the IRS garnish a taxpayer’s social security check.

Section 6334 (c) of the Internal Revenue Code (26 U.S.C. 6334 (c)) allows Social Security benefits  to be taken to collect unpaid Federal taxes. If your monthly benefit is more than $750, the IRS  may garnish fifteen percent of your social security  monthly benefit for taxes that are at least six months in arrears. The IRS is required to notify you before it begins to garnish , and you can appeal the garnishment for"hardship.”

This rule is common sense. People who owe the government money should pay their government debt before they receive additional government money.

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Posted on January 2, 2012 by Jonathan Alper

Can Creditor Hold Debtor In Civil Contempt For Failing To Transport And Assemble In Florida The Debtor's Out-Of -State Assets?

I am frequently  asked whether a creditor can get a court to hold a debtor in contempt of court for not paying a civil judgment. This past week one of my clients explained that he had recently moved to Florida but maintained a car, bank accounts, and collectibles in his former residence. He asked me whether his creditors could obtain a Florida court order commanding him to transport the car and collectibles to Florida and move his money to a Florida bank, and if they could, whether he could be held in contempt and put in jail if he did not comply with the court order.

I am not been involved in any case where a court has threatened to hold my client in contempt if he did not move his own assets from another state into Florida where a creditor could more conveniently levy upon the assets. Essentially, a court would be ordering a debtor to collect his own assets to pay his creditor and threatening to put the debtor in jail for non-compliance.

 

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