Having to protect your assets in Florida because you are at fault in a car accident is something we never expect to happen. While many people purchase the required level of insurance, they are often shocked that potential liability stemming from a car accident can far exceed their insurance levels.
Furthermore, in Florida, you do not even need to have driven a vehicle involved in the car accident to face a potential monetary judgment. Under Florida law, both the at-fault driver and the owner of that vehicle can be sued for damages relating to the car accident.
Figuring out how to protect your assets after a car accident begins with understanding how the injured person would be able to collect should they sue and obtain a judgment against you. The most common collection tools are wage garnishments and bank account garnishments. With a wage garnishment, the judgment creditor will be able to seize up to 25% of your take-home pay (the amount after required deductions). With a bank account garnishment, the creditor may be able to seize whatever funds you have in your bank accounts.
Once a bank receives a garnishment from the car accident judgment creditor, the bank will be legally required to freeze the account. In most states, including Florida, the bank must then file a formal response which states the titling of your accounts and how much money was in the account at the time the bank was served with the garnishment documents.
However, there are exemptions to these creditor tools. First, if you legally qualify as head of family (also called head of household) under Florida law, then your wages may be exempt from garnishment. In addition, wages of a head-of-household that are deposited into a bank account may retain their exempt character for up to six months. More complicated is when wages are paid from an LLC or corporation owned by you. In addition, distributions of profit from your business may not qualify as protected wages.
In addition to the head of household exemption, there may be other defenses to assert against the garnishment, including those related to garnishment procedure and property ownership.
As to how the judgment creditor will find out where you bank or where you work, Florida law provides the creditor various tools. For example, the creditor may examine nearly all of your financial documents, including bank records, tax returns, wage statements, and so on. In addition, the judgment creditor can take your deposition under oath and ask you about your finances. Some creditors are able to obtain your banking history from third-party sources. Therefore, trying to hide assets from the judgment creditor almost never works and is not a good strategy.
One of the first things that may happen after a car accident is that your insurance company may give you a financial affidavit to fill out. The insurance company will likely say that the affidavit comes from the injured’s person attorney, who seeks to know what assets your have. The financial affidavit helps the injured person decide whether or not to sue you for damages in excess of your insurance policy limits.
There is no law in Florida that requires you to fill out the affidavit. That being said, sometimes it is a good idea to fill it out; sometimes it is not. It depends on what you hope to achieve in sending the affidavit and how well you have implemented an asset protection plan. Often the best course is to review your asset protection status, fix any issues, and then perhaps send in the affidavit. It is never too late to protect your assets, even after the car accident occurs.
Engaging in an asset protection plan after a car accident is the process where you can structure your assets, including businesses, investments, and savings, to make it more difficult—if not impossible—for the injured person to collect on their judgment. That difficulty can then give you leverage in settling the case with the injured person, either before or after the judgment is entered.