I'm going to talk about garnishment now in the difficult situations. Where you have a
single debtor, unmarried, no children who has a judgment against them. Or you have the
married couple but the judgment is against both of them. Maybe one spouse was the borrower
and the other spouse signed as a guarantor. Or many times as most people know the bank
will require both the husband's and the wife's signature in order to make a loan.
In those situations, you don't have the head of household exemption, you don't have the
tenancy by the entirities exemption. Well let me back up, in the married situation,
you can have the head of household situation, but if both of the parties work then the one
who makes the the least amount their account can be garnished. But you don't have the tenancy
by the entirities exemption if the judgment is against both the husband and the wife and
that's a critical exemption in Florida.
People often come in and they say well what do I do now? With a judgment against my wife
and I, should I just transfer these assets into my parents' name, my child's name. Should
I open a bank account in my children's name and put all my money in there? You know you
can't do any of that because all of that falls under the guise of fraudulent conveyence.
And a fraudulent conveyence is any transfer of assets out of your name for less than full
value done for the purposes of avoiding the claims of creditors. And the courts tend to
be pretty liberal in deciding when someone has a judgment against them that any transfers
being made were being done to avoid that creditor.
Some people say, "well I guess I just have to bury it in my backyard." And that may work
for a while but unless you lie about it and commit perjury they're ultimately going to
find out where it is. Now obviously you say in Florida I certainly can't put it in a bank
account in my name or my wife's name or both of us because they'll be able to garnish that
account. And that's true.
But what if there was a state that didn't recognize garnishment of bank accounts. In
fact, specifically prohibited the garnisthment of bank accounts except for tax liabilities
owed to that state? You could then put your money in that bank account and it wouldn't
matter if the judgement creditor knew about the account or not because they can't garnish
in that state and it could be business, it could be personal. And what if somebody has
a company and they're self-employed and the company is also liable on that debt?
You might set up a new company, you might setup that new company in the state that does
not allow garnishments. And the new company opens bank accounts in the state where it's
incorporated. It can come to Florida and be authorized to do business in Florida, but
it's not a Florida corporation and it wouldn't have any money in Florida.
Now when you get into a transition from old company to new company, I want to caution
everybody that to do that effectively to avoid the old judgment creditors, requires a great
deal of planning and a great deal of precision. Because if you don't hit the bullseye, you
lose. So it's got to be done right and it's got
to be done correctly but it can be done.
Well some people may say, "well if I open this account in another state wouldn't that
be a fraudulent conveyence?" And the answer is clearly no. You still own that bank account.
If it's a husband and wife situation or a single person and they open the bank account,
it's their bank account just the same as a Florida bank account would be theirs. So they
own it, they have not conveyed away anything. They still are the owner. And you can tell
the judgment creditor, you can honestly answer the question, well do you own a bank account?
Yes I do. It's the first national bank of such and such in this other state. It doesn't
matter if they know because they can't get it.
And I think that's probably the essence of really effective asset protection. Asset protection
is not lying about things. It's not burying things in the backyard or playing hide and
seek with things. Rather, it's creating a strategy that places your assets in a place
and in a way that you can tell people where they are. It doesn't matter because they can't
get to them.