What to Do If Someone Sues You for a Car Accident

Here’s what you should do if someone sues you after a car accident:

1. Contact your insurance company.
2. Work with the attorney the insurance company hires.
3. Review your assets to see what is at risk of collection.
4. Protect any exposed assets from collection in case a judgment is entered.

Even after a lawsuit is filed, you can often legally take steps to protect your assets from an eventual judgment.

Florida law exempts from collection various assets, such as retirement accounts, homestead, head of household wages, and tenancy by entireties assets against separate debt. You may be able to take better advantage of statutory exemptions even after the accident has occurred.

How to Protect Your Assets After a Car Accident

To protect assets after a car accident, a person should (1) assess whether the damages are within the policy limits, (2) determine which assets are vulnerable to collection, (3) implement a plan to protect those assets, and (4) submit a financial affidavit that demonstrates the difficulty of collection on a money judgment.

Protecting assets after a car accident in this way involves taking advantage of the many protections provided by Florida statutes and common law as soon as possible.

Does Insurance Protect You from Car Accident Liability?

Car insurance, specifically liability coverage, can protect you financially if you’re found legally responsible for damages or injuries in a car accident. This coverage pays for repair costs, medical expenses, and other compensation required by law to the other party up to your policy’s limits. However, it doesn’t cover your injuries or vehicle damage. For that, you need collision or comprehensive coverage. And it doesn’t cover any damages beyond the policy limits.

Adequate liability insurance, including an umbrella policy, is the best asset protection against car accident liability. In most cases, the injured party’s attorney will settle their claim for an amount within the limits of the defendant’s insurance. The reason is that the plaintiff’s goal is to get the most money for the least amount of effort. They want quick settlements, not protracted litigation. An insurance settlement includes a release of the car driver and owner. The car owner and driver will not have personal liability if the plaintiff’s claim is resolved and paid by insurance.

But sometimes, car accident cases do turn into lawsuits, particularly if the driver carries minimum insurance or the defendant appears to have substantial unprotected assets. When the at-fault driver and car owner maintain an insurance policy with inadequate personal injury limits, the injured person may decide that they can collect more money through litigation and a money judgment than through an insurance settlement.

Defendants with inadequate insurance need properly planned asset protection to avoid collection on a personal judgment and to improve their negotiating position during the settlement process.

Can You Lose Your House Due to a Car Accident?

In Florida, you cannot lose your house due to an at-fault car accident. No matter how much the other person is injured, the Florida homestead exemption protects the home of the at-fault driver from a potential money judgment.

Under Florida law, the homestead exemption protects an unlimited amount of value, but it is limited to a house situated on a half-acre lot in a city and 160 acres in an unincorporated county. There may be other exemptions that protect the at-fault driver’s house, including tenants by entireties protection.

If You Are Being Sued for a Car Accident, What Can They Take?

If you are being sued for a car accident, a judgment creditor can potentially take (1) non-exempt bank deposits, (2) up to 25% of net wages, (3) non-homestead real property, (4) equity in vehicles, and (5) any other non-exempt personal property. However, Florida law can exempt some or all of a person’s property and provides many ways to protect assets from judgment collection.

In terms of collection, Florida law provides a judgment creditor with various tools to help collect a personal money judgment from a car accident lawsuit. For example, the creditor may examine nearly all the debtor’s financial documents, including bank records, tax returns, and wage statements. The judgment creditor can take the debtor’s deposition under oath and obtain detailed information about the debtor’s assets and financial history. Therefore, planning to hide assets from a potential judgment creditor is not a good asset protection plan.

Writs of garnishment directed against the defendant’s bank accounts and their wages are usually the plaintiff creditor’s most effective tool to collect money following a car accident judgment. A judgment creditor may obtain a writ of garnishment from the clerk of court and proceed to serve the writ on the debtor’s bank. Upon receiving the writ of garnishment, a bank will freeze all bank accounts that include the debtor’s name on the account title.

The bank must file a formal response to a writ of garnishment that states how the frozen accounts were titled and how much money was in each of the debtor’s accounts when the bank was served with the garnishment documents. The debtor has an opportunity to dissolve the garnishment freeze if the debtor can show that the money in the bank accounts is exempt from collection under Florida law.

The plaintiff can also garnish wages payable to the judgment debtor. The plaintiff can direct the debtor’s employer to withhold and pay to the plaintiff up to 25% of the debtor’s wages net of tax withholding and other required deductions. Wage garnishments remain in effect continually during the debtor’s employment or until the debt is paid.

Florida law provides debtors defenses to these creditor collection tools. Debtors who qualify as head of family (also called head of household) under Florida law are usually exempt from wage garnishment.

In addition, wages of a head-of-household deposited into a bank account retain their exempt character for up to six months. A debtor may have other defenses against wage garnishment based upon procedural defects in the creditor’s garnishment.

Bank accounts are exempt from garnishment if owned jointly with the debtor’s non-debtor spouse as tenants by entireties or if the accounts hold money exempt from collection such as social security, disability, or annuity proceeds.

Should You Fill Out the Financial Affidavit After a Car Accident?

Summary: most people should fill out a financial affidavit after a car accident. Most cases settle and filing out the affidavit helps the case settle. However, if you have significant assets and the claim is high, you may not want to fill out the financial affidavit.

Soon after a car accident, an insurance company may request that an insured defendant fill out a financial affidavit. The plaintiff and insurance company want information about the defendant’s assets to decide if they should settle within insurance policy limits or pursue the defendant for a money judgment.

Florida law does not require you to submit an asset affidavit. That said, sometimes the financial affidavit is helpful. The defendant wants to demonstrate that collection of a civil judgment would be difficult. In that case, the plaintiff is more likely to settle with the insurance company for an amount within the policy limits.

It is important that the defendant review their asset protection situation before submitting an affidavit. An affidavit is signed under oath, and the defendant does not want to intentionally falsify asset information on the affidavit. The defendant can employ asset protection tools to increase protection first and then send in the affidavit.

The at-fault driver’s best course is to review their asset protection status, fix any issues, and then consider a financial affidavit. A well-planned financial affidavit can increase negotiating leverage leading to a settlement that avoids a lawsuit.

Being Sued for a Car Accident When You Have No Assets

Lawsuits are expensive and time-consuming. The vast majority of car accident plaintiffs and their lawyers prefer a quick and easy insurance settlement, no matter how small, rather than filing a lengthy, expensive, and risky lawsuit against someone who does not have any assets.

The same applies to people that do have some or even a substantial amount of assets, but who are able to protect those assets from creditors.

FAQs about Car Accident Liability