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

 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.  

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 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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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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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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You judgment creditor can target automobiles you own free and clear of any lean. Clients often ask me how a creditor goes about taking their cars. A particular concern is about creditors entering the homestead grounds to take a car parked in the debtor’s driveway or the debtor’s garage.

If a creditor identifies a car in your name the creditor can describe the car to the sheriff, including the VIN number, and instruct the sheriff to levy upon the car. An existing lien on the car makes levy unlikely because there typically is insufficient equity to warrant levy, but a creditor still has the right to levy upon a car subject to a lien.

Most times, the sheriff will pick up a debtor’s car when the car is on the public streets or in a public parking lot. However, a creditor can get a court order authorizing the sheriff to enter upon your homestead property to take a car.

Parking a car in your enclosed garage will not stop a levy. I have seen cases where the creditor obtained a court break order authorizing the sheriff to break into the debtor’s garage with force to take a debtor’s car. In this particular case, one of the garaged cars was owned free and clear, and another car was still subject to a purchase lien. The break order expressly authorized the sheriff to “break or remove any lock, outer door, or other hindrance or impediment to entry of the premises.”

Hiding assets, whether money or cars in a garage, is rarely an effective asset protection strategy.
 

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Many of my Florida clients need asset protection planning to protect themselves against claims in another state. A creditor that obtains a judgment in another state can enforce the foreign judgment through Florida’s courts to collect money from the debtor residing in Florida. A few people have asked me whether there is a time limit on the enforcement of foreign judgments in Florida. How long does a creditor have to domesticate and enforce a foreign state judgment against a Florida resident?

There seems to be two ways, and two corresponding time frames, by which a creditor can enforce a foreign judgment in Florida. The old way is a common law procedure referred to as “an action to enforce a foreign judgment.” The common law way entails the creditor filing a new lawsuit in Florida based upon the foreign judgment. This procedure is referred to as “an action on a judgment.” . The creditor asks the Florida court to issue a new Florida judgment in order to enforce the prior foreign judgment.  A creditor has five years to institute an action on a foreign judgment pursuant to Florida Statute 95.11(2)(a). The court would issue a new Florida judgment which survives for up to 20 years.

The new way to enforce a foreign judgment is to record and domesticate the judgment pursuant to Chapter 55 of the Florida Statutes. The statutes adopt a uniform statutory method of enforcing foreign judgments in various states. If a creditor domesticates a foreign judgment he can use the Florida courts to enforce the judgment, but he does not get a new Florida judgment. The only time limit on recording a foreign judgment is that the judgment must be recorded prior to the expiration of that judgment under the laws of the forum rendering that judgment. For example, if a creditor gets a judgment in New York against a Florida resident the creditor has twenty years to record and enforce the judgment in Florida because New York judgments are good for twenty years.
 

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If you have paid money to the IRS to cover estimated future tax liability, can a judgment creditor ask the IRS to turn over the money the IRS is holding on your account? One of my clients has in his possession a large amount, over $1 million,  of U.S. Savings bonds. He understands that a prospective judgment  creditor may be able to attack the bonds. The client wants to cash out the bonds and take other measures to protect the cash. If he redeems the bonds, he says, the bank will pay the IRS money to cover his estimated tax liability on the savings bond interest. He wants to know if a creditor could get the money the IRS is holding for an uncertain future tax liability.

Federal law prohibits civil judgment creditors from garnishing the IRS. Creditors cannot garnish tax refunds in the IRS’s possession. Some debtors seek protection of cash by advance payment, or overpayment, of future tax liability. In bankruptcy, a prospective tax refund is property of your bankruptcy estate and must be turned over to the bankruptcy trustee when received from the IRS. A trustee cannot take the money from the IRS before the refund is issued to the debtor.
 

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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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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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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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Concerned debtors sometimes ask me if their judgment creditors can come into their home and take all their furniture and other stuff.  Debtors and prospective debtors are not going to like this answer: Yes they can.

Florida courts have permitted creditors to go through a debtor’s home and inspect their belongings for the purpose of organizing a sheriff’s levy on the debtor’s things. To make things more scary, there is a case which permits the creditor have the sheriff break into the house by force with a “break order” ex-parte, meaning without notice. Of course, the debtor can assert exemptions, including in the case of a married debtor, the tenants by entireties exemption. However, in the case of husband and wife joint judgment debtors there is authority for break orders without notice into the debtor’s homestead to levy upon the joint debtor’s things.

I’ve talked with creditor attorneys who occasionally use break orders to attack joint marital debtors or unmarried single debtors. The creditor attorneys use this tactic primarily for intimidation purposes. No creditor expects to recover significant money from the sheriff’s public sale of a debtor’s used furniture.

 

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Asset protection planning does not protect against IRS debt. Nevertheless, clients sometimes ask me how long the IRS has to assess additional tax and to collect unpaid taxes. I saw a good summary of the topic on a post written on a well-known tax blog called Taxgirl. The blog is published by Kelly Phillips Erb and is an excellent source of tax information. All I know about IRS's collection of past due tax debt is what I read on Taxgirl.

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Debtors who are head of Florida households sometimes have writs of garnishments served on their employers, and Florida debtors that maintain exempt tenants by entireties financial accounts sometimes suffer writs of garnishment against their exempt accounts. These debtors have to explain their exemption to the judgment creditor, or they have to hire an attorney to file a motion to dissolve the writ based on the applicable exemption. Such debtors often ask me whether their judgment creditor prior to serving a garnishment is required to investigate whether the wages or accounts are exempt from garnishment and whether the creditor can serve a garnishment against an asset that could be exempt from garnishment . These debtors think it unfair for a creditor to make the debtors go to court to assert their exemption while the creditors surprise garnishment has frozen their accounts.

A judgment creditor is not required to check you your possible exemptions prior to serving a writ of garnishment on your employer or your financial institution. Prior to 1967, the predecessor to Florida’s garnishment statute required a judgment creditor to affirmatively negate the garnishment-defendant's ability to claim an exemption; however, the present version no longer requires any affirmative action to check the possible exemptions of a garnishment defendant before pursuing a writ of garnishment.

If you or your attorney notify the judgment creditor in advance that your wages or accounts are exempt and the creditor serves a garnishment thereafter which you subsequently dissolve, you may be able to sue your judgment creditor for the tort of wrongful garnishment.

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A judgment creditor cannot garnish wages of a Florida domiciled debtor who is head of household. Assume, that a creditor sues the Florida resident in Georgia and gets a money judgment against a Florida resident based on a transaction in Georgia. . During the proceeding, the debtor was a full time resident of Florida and worked in Florida. The employer had an office in Georgia, but it paid the debtor his salary in Florida. Do you think that the Georgia creditor can garnish the wages in Georgia at the employer’s Georgia address, or can the debtor assert his Florida wage exemption because he is a Florida citizen?

Similarly, suppose the Florida debtor had lived previously in Georgia many years ago, and that when he Georgia he opened an annuity investment account at the Georgia office of a national finance company. Surely, Florida statutes exempting IRA from creditor levy would protect the debtor’s IRA account.

The Florida statutory exemptions will not protect the debtor in Georgia. The Georgia creditor can garnish his wages paid in Florida and his annuity to the extent either are not otherwise exempted under Georgia laws. There is a general rule of law that exemptions cannot be exported, so that most courts in other states will not recognize exemptions afforded to Florida residents. In other words, exemption laws have no extraterritorial effect.

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Debtors fear court imposed asset freezes prior to judgment. If a creditor can convince a court to freeze a debtor’s assets after the creditor files a lawsuit but before the cases is decided and judgment is entered the debtor cannot engage in further asset protection planning. For instance, a court ordered injunction against the debtor or the debtor’s financial accounts could prohibit the debtor from buying a Florida homestead even though the homestead could not be reversed under fraudulent transfer laws. Many of my clients over the years have asked me if their creditor could obtain a court ordered asset freeze during their civil litigation.

The answer is legally complicated and depends on nature of the underlying civil action and specifically, what  relief  the creditor is asking for and/or is authorized by statute to obtain against the defendant. The U.S Supreme Court ruled that a court may not freeze a defendant’s assets when the plaintiff is seeking monetary damages. The Court held that a court does not have the authority in an action at law brought by a private plaintiff to freeze a defendant’s assets to preserve the assets for collection of potential money damages. Federal appellate courts have pointed out that the Supreme Court’s holding does not bar courts from freezing asset to preserve them for equitable remedies. Freezing assets is a well accepted equitable remedy to "preserve the status quo" and is proper in a lawsuit seeking equitable relief.

Asset freezes are most common in actions brought by federal agencies because the underlying enforcement statutes typically grant the government broad equitable remedies. I have  represented several clients whose assets were frozen during litigation with government agencies.

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The state of Massachusetts is serious about collecting corporate income taxes. An owner of a bankrupt Massachusetts corporation learned about Massachusetts corporate tax collection when he tried to renew his Florida drivers’s license. At attorney wrote me an email about one of his clients who was a principal owner of a Massachusetts corporation doing business in that state. The business owed corporate taxes to the state. The client owner owed no personal taxes. The attorney’s client resides permanently in Florida.

Massachusetts law enables the state to suspend your driver’s license if you don’t pay state taxes. The law makes principal owners of a corporation liable for the corporation’s income tax. After this client’s corporation filed bankruptcy owing state corporate income tax the state of Massachusetts listed the individual principal on a national registry of corporate tax deadbeats. It turns out that Florida checks the national registry, and our state respects suspensions imposed by other states for tax liability. This unsuspecting owner of a failed Massachusetts business finds himself unable to drive in Florida or Massachusetts until he pays his bankrupt corporation’s state income tax.

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There was a recent post about a conversation with a debt collection attorney concerning what he believed were, and were not, effective collection tools. I reported that this collection attorney did not find wage garnishment to be a good collection tool because wage garnishment often drove debtors into bankruptcy.

I received different opinion from another experienced collection attorney from the Tampa area who writes:

 This attorney's  opinion is consistent with my own experiences in bankruptcy practice. I have a few bankruptcy clients who say they are filing bankruptcy because their wages have been garnished, but I don’t find that wage garnishment is a primary cause of bankruptcy. Most bankruptcy debtors I deal with anticipate collection. In other words, most people file bankruptcy before a creditor gets a judgment which would subject their wages to garnishment. If a creditor attorney garnishes wages then in most cases the debtor cannot file Chapter 7 bankruptcy for one reason or another.

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Effective asset protection planning requires anticipation of what creditors’ attorneys may and will do to collect their judgments. The best way to learn creditor attorney strategy is to ask them. My social relationships with creditor attorneys are very valuable to me professionally, as well as personally, because they give me the opportunity to learn about their methods.

I recently had a lunch with one of Orlando’s preeminent collection lawyers. We discussed collection practices and asset protection strategy, and I found some of his comments to be interesting. I asked him what was the most effective debt collection tool. His answer was, without hesitation: bank account garnishments. Bank garnishments, he explained, was the only way to capture a significant amount of a debtor’s cash quickly and without lengthy legal proceedings. Bank accounts are where the money is. Bank garnishments strike a surprise blow to debtors which freeze their funds and usually force them to settle the remaining debt.

I next asked him whether wage garnishments were effective assuming the debtor is not head of household. He said that garnishments were not a good collection tool. First, the creditor collects small amounts of money each month toward the judgment, and his clients are not interested in long-term payback. Next, he explained, that wage garnishments usually force debtors to file bankruptcy because debtors will not work for an indeterminate future for the benefit of creditors. Wage garnishment, he felt, usually backfire against his clients' debt collection.

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A judgment creditor can levy upon a debtor’s stock in a corporation. After gaining possession of the stock the creditor can take all the assets of the corporation, such as bank accounts and accounts receivable, and the creditor can close the corporate business. This past week I consulted with a professional who owned his own professional business in the form of a professional corporation; a P.A. The professional owner was concerned that an existing creditor could close his P.A.’s business cut off his income.

I consulted a creditor collection attorney who practices in another city about the practicalities of a creditor levying on the stock of a professional corporation. The creditor attorney agreed that P.A. stock is subject to levy, but he explained that there are often practical obstacles to his levy upon the stock of a debtor’s professional business and the garnishment of the P.A. receivables. For example, it is difficult to garnish receivables of a medical P.A. because of HIPAA privacy regulations which protect patient identity. A creditor would find it difficult to collect medical receivables without breaching patient confidentiality. The same privacy issues are involved when a creditor levies upon an attorney’s stock in his professional corporation. A creditor’s inspection of the law firm billing records and files would impinge upon attorney-client privileges.

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When a corporation or limited liability company becomes insolvent the business owner often is worried that the creditors will try to "pierce the veil" of the corporation and sue the individual owner for all the business’s debts. Florida courts have made it difficult for creditors to pierce the veil of a corporation or LLC to hold owners responsible for corporate obligations. Creditors who contract with a business entity can pierce the veil and sue the owners only if they show that the corporation or LLC was established for an illegal purpose or if the owners were using the corporation to evade what is really a personal obligation (e.g., using a corporation to incur debt to personal consumption).

Most successful efforts to pierce a corporate veil occur when a "mom and pop" business owner intermingles personal and business finances, such as when he pays personal bills from a corporate account. The corporate veil is pierced in that case because the corporation is the legal alter-ego of the controlling owner. There is a famous Florida Supreme Court case on piercing the corporate veil called the Dania Jai-Alai case.

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People with potential judgments are often concerned about their household furniture. An attorney defending a judgment creditor sent me an email question concerning an aggressive collection action. The creditor took his client’s deposition as a first step in collecting a civil judgment He said the client testified under oath that while most of his household furnishings were owned jointly with his non-debtor spouse, he did own some antiques which he had inherited from his grandparents. Nothing happened for a couple weeks after the deposition.

One day, while away from home on Christmas vacation, the debtor received an urgent call from a neighbor. The neighbor said that a sheriff and deputies had parked a van in front of the debtor’s house, had broken into the house, and were taking things out of the house. The neighbor also reported that the sheriff showed him a court order authorizing the break in with a title from the collection lawsuit. The creditor’s attorney had obtained a court order at an ex-parte hearing where the debtor’s attorney did not have the opportunity to appear. There was no advance notice to the debtor or to the debtor’s attorney of the hearing or the sheriff’s taking of the debtor’s property.

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A judgment creditor threatens the debtor to garnish her alimony payments she receives from her ex-husband on a monthly basis. The debtor depends on the alimony to pay her mortgage an other household expenses. The debtor asks if the alimony is exempt from garnishment under the Florida statutes.

There is no statutory exemption of alimony or child support receipts. However, Florida courts have not allowed judgment creditors to garnish the debtor's alimony payments. Garnishment is permitted only where the garnishee (alimony payer) and the debtor have a debtor-creditor relationship. A Florida court many years ago held that alimony was not a "debt" in the traditional sense, and that alimony therefor could not be subject to garnishment. The court also held that public policy prohibited the garnishment of alimony from one ex-spouse to the other. No court has disagreed. The same court also found that alimony is not a form of wages which could be exempt under Florida's protection of head-of-household earnings.

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Suppose a husband and wife own personal property, a bank account for example, jointly with rights of survivorship in a state that does not recognize tenants by entireties ownership of personal property, and they intend to move to Florida. Florida recognizes tenants by entireties of personal property, and under Florida law all personal property owned by married couples with rights of survivorship is presumed to be entireties property. The question for this fact situation is whether the couples bank account in another state's bank becomes protected entireties property when the couple moves to Florida as permanent residents.

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You would think that people who donate substantial sums of money to charity would get a break when defending their charitable planning from judgment creditors. This past week a client asked me whether her creditors could attack a charitable trust she established. The debtor created the trust several years before she had any creditor problems, and the debtor was solvent at the time. The charitable trust was known as a "charitable remainder unitrust" under IRS regulations. The client donated marketable securities to the trust. When the debtor dies the trust will distribute all its property to a charity. During the debtor's lifetime the trust pays the debtor an annual payment equal to 7 percent of trust value. The trust document contains a "spendthrift provision" which states that the trust's payments to the client may not be assigned to her creditors. The client wanted to know if her judgment creditors can seize her annual payments or reverse the entire gift as a fraudulent transfer.

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Just because the law protects an asset or an account from creditor does not mean your creditors will not try to levy on the asset or garnish the account. Consider this example reported by a current client. The client, who is married, borrowed money in his own name from a large bank. The bank called the loan and demanded payment in full. The client ignored the call and continued to make timely monthly payments. The client and his wife had a joint account at the same bank. All money in the account was deposited from his wife's earnings. The wife did not sign the note or any guarantee of the note. Without warning, and without filing a law suit to enforce the note, the bank invaded the account and took all of the wife's money to pay off the loan.

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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.

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Hank Evans, Esq. is one of the smartest real estate attorneys I ever met. Hank has been practicing real estate law for 35 years in Titusville, Florida, where he represents several banks and many large real estate developers. He called me recently to ask me an asset protection question, and I used the opportunity to ask Hank Evans about his experience with mortgage deficiency judgments during the real estate and credit recession. I expected that Hank would be an excellent source of information about bank's practices with regard to foreclosure and deficiency claims.

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There have been some interesting comments to the blogs concerning deficiency judgments. One comment says that it is unlikely that a junk debt buyer can successfully buy and enforce a mortgage company's rights to a deficiency judgment because the secondary buyer would be reured to produce the original mortgage note. He says that owing to securitization and resalse of mortgages it is difficult for lenders and buyers of their deficiency rights to produce original notes unless they are members of organizations which serve as a repository for original documents. This person says that a debtor who lost property in a foreclosure can easily defend a deficiency suit if the bank sells its deficiency rights to a third party junk debt collector.

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A prospective bankruptcy client told me that Bank of America took money from his B of A bank account without notice to pay a delinquent credit card bill. The bank did not obtain a writ of garnishment, did not have a money judgment, and had not even filed suit. He wanted to know if the bank could seize his bank account without notice.

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In response to my statements on this Blog that most lenders do not pursue mortgage deficiency judgments, I received a email from an experienced collection attorney expressing a contrary opinion. The collection attorney (he did not giver permission to reveal his name) stated that he knows that lenders will be pooling mortgage deficiency judgments and selling them to collection companies for pennies on the dollar. Credit card companies have an established practice of selling non-performing credit card debt at seep discount. This same attorney says that many borrowers who walk away from mortgages will be in for a big shock in the future when collectors who have purchased the mortgage companies deficiency rights surprise the borrower with legal action.

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Judgments never go away. There is a 20 year statute of limitations for enforcement of judgments. Old judgments can come back to bite you. Take, for instance, the experience of a debtor who called me earlier this week who had a judgment entered against him in California in 1995. The debtor currently lives in Florida. She had heard nothing from the judgment creditor since 1995. Without warning, a couple week ago she found that writs of garnishment had been placed on all of her several bank accounts and brokerage accounts. All financial accounts were owned with her husband as tenants by entireties and were exempt.

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A divorced female reader submitted an interesting question about alimony payments. The reader relies on alimony payments from former spouse to pay most of her bills. She does not support a child, and therefore, she is not the head of a household. She is facing potential judgments from credit card companies as a result of her inability to pay some debts incurred during the marriage. She asks if her creditors could garnish her alimony payments.

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I have had a few discussions during this past week about creditor's ability to garnish wages of judgment debtors who are not head of household and who do not qualify for Florida's wage garnishment exemptions. If you are not head of household the Florida statutes permit creditors to garnish your wages. Garnishment is limited to amounts otherwise provided by federal wage garnishment laws. Federal law permits garnishment of 25% of the debtor's net earnings.

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A mortgage lender has the option to pursue a deficiency judgment following a foreclosure. Many people have asked me how long does the mortgage lender have to decide whether or not to get a deficiency judgment. Otherwise stated, what is the statute of limitations applicable to deficiency judgments. I do not practice civil litigation and have no personal experience litigating mortgage deficiency proceedings. I referred the question to a professional colleague who is involved in real estate and lender litigation. He said that there is a four year statute of limitations on deficiency judgments. If so, a lender has up to four years after a foreclosure judgment to file an action for a deficiency judgment against the borrower. As a practical matter, most lenders decide whether or not to seek a deficiency shortly after the foreclosure is complete. It is possible, but unlikely, a borrower will face a deficiency action years after the foreclosure judgment.

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A man worked as an executive for a public company and received compensation in the form of stock in his employer company. His stock certificates were restricted. He could not sell the stock certificates for three years, and he could not assign the certificates. Only the employee could redeem the certificates for cash, and could do so any time during his lifetime. He could not bequeath the stock to his heirs. The man asked me whether a creditor could levy on his stock certificates.

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I get frequent calls from people whose checking accounts have been improperly garnished by creditors. Sometimes a individual debtor has an account owned jointly with his spouse as tenants by entireties which account is exempt from creditors of either individual spouse. In other cases, a caller states that the account contains wages and that he is head of household. This money, too, is exempt. Some creditors do not know your bank account has exempt money. For example, when the creditor sees an account in the debtor's individual name the creditor does not know ( or does not want to know) that it's a wage account. Creditors that garnish joint accounts often do not know (or do not care) that the money may be exempt. Remember, not all accounts owned jointly with your spouse qualify for entireties accounts; there are exceptions. For example, if husband and wife do not put their names on the account at the same time, or if the current spouses first opened the account before they were married, the account technically is not a protected entireties account. When a creditor improperly garnishes a protected bank account it is up to the debtor to get a court order dissolving the garnishment.

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I recently read seminar materials about asset protection from income tax debt which had been published by Larry Heinkel www.taxproblemsolver.com. Larry is an expert in the area of income tax debt in bankruptcy. His article pointed out some common misunderstandings about tax debts. First, Florida's homestead law does not protect homeowners from income taxes. A tax lien attaches to your homestead unlike a civil judgment. Next, Florida's statutes prohibiting creditors from garnishing wages of the head of household does not protect against IRS collections. Also, a divorce decree which specifies which spouse is responsible to pay tax liability is not binding on the IRS. The IRS can go after either divorced spouse for the full amount of tax debt.

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Someone called me today about protection from alimony and support judgment emanating from a divorce. The question was whether a spouse can avoid contempt for non-payment if the spouse's normal job requires constant travel and relocation around the United States. The general rule is that most asset protection tools do not protect against marital decree liability. Marital courts have equitable powers to change ownership rights in property otherwise exempt from general judgment creditors. A judge can hold a divorced spouse in contempt simply for not paying court prescribed marital debts.

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The general rule is that social security benefits are exempt from garnishment. There are exceptions to most rules. One of my clients had retired from a government agency, and the government claimed the client owed the government money. The agency represents that they have the right to a lien on all government benefits, including social security payments. The agency did not cite a statute or contract right. However, the government's position makes sense. If you owe money to the IRS you cannot receive a tax refund. Similarly, if you owe money to another government agency it seems reasonable that agency have a lien on government pensions and other benefits. As with tax debt, asset protection rules are often different when the creditor is the U.S. government.

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A lady residing in Texas emailed me about a judgment entered in a Texas court over 10 years ago. She works in Texas for an employer which has its main corporate office in Florida. The Texas creditor domesticated its judgment in Florida. The creditor had the Florida court issue a wage garnishment which the creditor served on the employer at its corporate office in Florida. The lady said that she is head of household as she is divorced and supports her minor child. She asked whether the creditor can garnish her wages in Florida as opposed to Texas where she resides, and whether she can take advantage of Florida laws preventing garnishment of head of household.

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A collection attorney from outside Florida called me about enforcement of an equitable lien on property. He obtained a judgment from a Florida court against a Florida debtor declaring that the creditor had an equitable lien on real property owned by the debtor and that the debtor held title in constructive trust for the creditor. The attorney wanted me to send him a form for perfecting his lien and trust.

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Creditors enforce money judgments by getting a writ of execution from the court allowing them to levy on a debtor's assets. I received an email from a Blog reader which puts forth an interesting argument that a creditor's writ of execution is good only for one year. Rather than summarize the argument, I will publish the entire email below for consideration.

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Occasionally, I get questions from creditors trying to collect judgments in Florida. Some of the questions are relevant to asset protection planning. Here's one. An out of state creditor had a judgment against a Florida resident who owned rental real property in Florida. The creditor wanted to see if he could garnish the tenants' rent payments. The creditor wanted to know if he could get a continuing writ of garnishment against the tenants so that each month the tenants would sent their rent payment to the creditor instead of their debtor/landlord.

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I received an email inquiry about whether "equity reduction plans" are an effective asset protection technique. The mail described these plans as a version of equity stripping . In the equity reduction plan someone puts a friendly mortgage or lien on the debtor's property but no money actually changes hand. I inferred that the tool is supposed to place a priority lien on the property to a friendly creditor without having to actually find or obtain enough cash to fund a lien large enough to cover most of the property equity.

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A Florida man opened a wage account at a local branch of a large national bank in which he deposits only his salary. The man is married and head of household. A creditor got a judgment against the same man in California. The creditor did not yet domesticate the judgment in Florida. The creditor garnished the account at a California branch of the same bank. California law does not provided unlimited protection from wage garnishments and does not protect wages deposited in bank accounts. Is the Florida debtor's wages protected from garnishment in California.

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A client has a professional license in Florida. The license is a valuable asset to the client. The client asked whether his judgment creditors can levy on his license. The answer is no. Professional licenses are personal to the licensee and are not assignable. The judgment creditor cannot have the license put in the creditor's own name nor can the license be sold to anyone other than the licensee. The debtor's license has no value to anyone other than the debtor/licensee. Other licenses, such as liquor licenses, are subject to execution and levy because these licenses not personal.

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A Florida resident wrote a comment asking about the effect of a Florida judgment in another state with a short statute of limitations on judgment collection. Florida judgments are enforceable for 20 years. The reader stated that the other state had a 4 year statute of limitations on collection of judgments. What happens to the judgment if the debtor moves from Florida to the other state?

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A man called me concerning collection of an education loan. The caller had defaulted on payment of a large education loan, and the government had turned over collection to a private collection firm and its attorneys. The collection firm threatened to garnish the caller's wages. The caller explained that he supported his spouse and that he was head of household. Initially, I told him that his wages were protected from garnishment by Florida Statutes because of his head of household status. When I looked into the matter further I discovered that there are federal laws and regulations concerning collection of student loan. These laws specifically permit wage garnishment, and they state further, that the governments garnishment rights supercede state law regarding wage garnishment. I found cases in other states which said that the federal government's right to collect default student loans preempted the state's garnishment protections. It would appear that the federal government can garnish the wages of a Florida head of household to collect student loan debt. Please email me if someone is aware of contrary law.

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Creditor obtained a judgment against a charitable organization which had registered with the IRS as a 501(c)(3) organization. The creditor garnished the charity's bank account. A representative of the charity asked me if the garnishment was legal because the charity's bank account contained gifts from donors who understood their donation would be used for charitable purposes.

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Some creditors are smart; some are devious, and others are both smart and devious. Here is an example of the latter type of creditor from an inquiry I received this past week. Creditor files a lawsuit. Defendant hires an attorney to defend the lawsuit. The creditor wins a large judgment against the defendant. When creditor tries to collect the judgment he finds that the defendant has no collectible assets. Creditor tells the defendant that defendant's attorney "screwed up", and that absent the negligence of defendant's attorney the creditor states that the defendant would have won the case. This makes the debtor/defendant angry at his attorney so he sues attorney for malpractice. The attorney has malpractice insurance. After the suit is filed the creditor did one of the following ( it wasn't clear from conversation) : the creditor either levies upon the defendant's cause of action against his own attorney or any insurance proceeds therefrom, or he joins forces with defendant to help fund and prosecute malpractice action against defendant's attorney in exchange for a share of insurance recovery. The creditor now has the attorney's insurance policy as a source of money to recover what he could not otherwise recover from the judgment proof defendant.

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A frequent asset protection question is whether engaging in a transfer of assets later found to be a fraudulent conveyance subjects the debtor to an award of additional damages. Neither the Florida Statutes, nor case law, provides that a creditor can add damages to the amount of its underlying judgment for damages because the debtor attempts to transfer or convert assets to avoid collection of the judgment. On the other hand a relatively unknown statute provides that a fraudulent conveyance can trigger a creditor's right to collect attorneys fees.

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Occasionally, I will help creditors collect a judgment from debtors who are trying to hide assets. Working for the "dark side" once in a while helps me design better asset protection plans because I can see the collection process from a creditor's vantage point.

When a debtor has made fraudulent transfers or conversions to evade collection, I find that one of the most effective collection techniques is a "proceedings supplementary" under Florida Statute 56.29. The statute provides that upon the creditor making a motion the court may order the debtor to appear in court and testify under oath before a judge or magistrate. If upon examination it appears that within a year before service of process the debtor transferred money or property to a spouse, friend or relative the debtor must prove at the hearing that the transfer was not made to defraud creditors. Friends or family members who may have received fraudulent conveyances may be called as witnesses. If the court concludes that there has been a fraudulent conveyance the court shall order the sheriff to take possession of the property conveyed. Costs and attorneys fees may be taxed against the debtor.

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A creditors rights to collect money from a partnership interest or LLC interest are limited by statute to a charging lien against distributions to the partner/member. A client explained that one of his creditors has asked a court to appoint a receiver over his family limited partnership for the purposes of collecting partnership assets and enforcing a charging lien against the client's partnership interest. The family partnership was formed outside of Florida and the motion for receivership is being litigated in the foreign state where the partnership is formed. The foreign state in question has charging lien remedies similar to Florida laws.

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I have previously written on this blog that Florida asset protection planning is often less effective against actions by Federal agencies such as the IRS, FTC etc. Federal agencies often have statutory authority to take preemptive collection actions against targets of their regulatory actions beyond the powers afforded commercial creditors in Florida state courts.

I received an inquiry from a reader who was involved in a legal dispute with the Commodities Future Trading Commission (CFTC) before a federal court in a state other than Florida. The reader stated that prior to their getting a court judgment the CFTC had frozen financial accounts in Florida owned by the reader and his wife as tenants by entireties (TE). The reader's wife was not a party to the CFTC action. TE assets are immune from civil judgments against either spouse individually under Florida common law. The reader questioned how the CFTC could freeze his protected TE account in Florida before the CFTC even had a final judgment in the CFTC proceeding.

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I received a call from a doctor who had his checking account garnished by a creditor who obtained a judgment over 10 years ago. The caller had found by his own research that judgement liens expire in 10 years, and he asked how the creditor could apply his judgement which is now over 10 years old to garnish a bank account.

The caller confused judgments and judgment liens. A judgment lien is the recording of a certified judgment with the Florida registry. The recording gives the judgment holder priority over judgments subsequently recorded. Any proceeds from the forced sale of debtor's property subject to the judgment will go to pay priority judgment liens first, and money left over, if any, is applied to the junior liens. Property such as homestead is not subject to judgment liens. After 10 years the first recorded judgment lien loses its priority standing

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Many clients asked me how they can deal with consumer creditors such as credit card companies when they are delinquent in payments. I had a new client this week who seemed to be very successful in getting creditors to stop calling and in negotiating favorable settlements for delinquent credit card debts. They settled several debts for less than 50% of the balance, and they had eliminated most collection agency harassment. I asked them why they had been successful and where they learned their tactics. The clients said they read a book called "How to Settle Your Debts" which they found and purchased on Amazon.com. They said the book clearly explained how consumers can best deal with collection agencies and how to negotiate favorable settlements which included elimination of adverse reports to credit agencies. I found the book on Amazon for $15.00. It's a new book having been published in September 2004. ; I have not read the book, but based on these clients' experience, many people could benefit from whatever advice the book offers.

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One of the biggest asset protection mistakes is underestimating the skill, intelligence, and resolve of creditors and their attorneys. My representation of a current Florida client provides a good example of creditor creativity. My client had a judgment entered against him personally and his defunct corporation in Dallas, Texas where the corporation was doing business. The debtor/ client at all times was a Florida resident. The creditor attorney recorded the judgment in Houston, Texas and applied for a receivership over the insolvent company and the debtor. Florida has not law permitting receiverships over people. But, Texas Civil Practice and Remedies Code Section 31.002 expressly permits a creditor to put an individual in receivership, and as I found out, courts in Houston, particularly, create personal receiverships quickly upon the request of any creditor. As a result, the creditor now has appointed a receiver over the person of the debtor. A receiver is an officer of the court who takes over whatever rights and powers the debtor has. The receiver is likely to come to Florida and try to order the debtor to turn over all of his property to the Texas court.

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