Example of Asset Protection Planning After a Judgment Is Entered

Clients often want to know whether they can still do asset protection planning after a judgment is entered against them. The answer is yes in many cases.

As an example, suppose an elderly lady had guaranteed her son’s business loan which the son could not repay when the business failed. The business loan was made in another state with a national bank. The bank just got a judgment against the mother and son for several hundred thousand dollars. The mother lives in Florida in a home with a $40,000 remaining mortgage. She has about $60,000 in savings in accounts at the same bank that got the judgment. She has been living primarily off monthly checks from her deceased husband’s pension and social security.

Here are the post-judgment planning steps I would recommend. First, she can pay off her remaining mortgage, leaving her with about $20,000 at the creditor bank. Paying a homestead mortgage cannot be reversed under Florida law.

Next, she can move the financial account from the creditor bank to a small bank in Florida. Doing so would not be “hiding” the money, but it allows her to remove the money from the creditor’s doorstep. The mother’s litigation attorney can probably delay discovery of new bank accounts for a few months after the judgment is entered.

The mother can stop using her exempt pension proceeds and social security to pay monthly living expenses. Instead, she can use her savings to pay expenses until the money is depleted and hopefully before it is located and garnished. She can also use the non-exempt money to make repairs and improvements to her homestead as well as pay her legal bills and taxes.

The unspent pension and social security money can be used to purchase an immediate annuity. Florida statutes exempt annuities and all annuity distributions from creditors. Using pension and social security money to buy an annuity is not a fraudulent conversion because the pension and social security checks are themselves exempt from creditors. When her cash is spent, the debtor mother can revert to living off the pension, social security, and her new annuity.