August 2020 Asset Protection Case Law Update

This case law update concerns transfers of exempt property after filing bankruptcy, the statute of limitations for fraudulent conveyance, and proper wage garnishment jurisdiction.

Bankruptcy Debtors Can Sell or Transfer Exempt Property After Filing Date

In re: Hampton, 2020 WL 3969247 (Bankr. S.D. Fla. 2020).

Summary

A bankruptcy court confirmed that bankruptcy exemptions are determined as of the petition date. Therefore, if property is exempt on the petition date, it does not matter what a bankruptcy creditor does with the property after the filing of a bankruptcy petition. In addition, the bankruptcy court determined that money withdrawn from a protected Florida homestead in a HELOC (home equity line of credit) is exempt from creditors.

Practical Advice

Florida debtors considering bankruptcy should generally not worry about what they do with their exempt property after the petition date. Same thing for income received after the bankruptcy petition is filed. Creative use of home equity loans may be able to protect otherwise non-exempt money from creditors.

Statute of Limitations for Fraudulent Conveyance is Four Years in Proceedings Supplementary

Uoweit, LLC v. Fleming, 2020 WL 4198362 (Fla. 4th DCA 2020)

Summary

Previous court decisions had ruled that a creditor’s fraudulent transfer complaint brought within a post-judgment proceedings supplementary (Section 56.29 of the Florida Statutes) is not limited in time by the four year statute of limitations set forth in Florida’s fraudulent transfer law (§ 726.110) and that there is no limit how far a creditor can reach back in time to find fraudulent transfers. In this decision, the Court said that subsequent to these prior decisions the legislature amended § 56.29 to provide that the four year statute of limitations is applicable to fraudulent conveyance claims.

Practical Advice

Florida debtors are no longer subject to unfair creditor collection tool that subject transfers made many years before the creditor’s claim vulnerable to fraudulent transfer suits. Do not attempt to hide asset transfers because fraudulent transfers that a creditor can not discover are subject to only a one year statute of limitations.

Wages Are Subject to Garnishment in the State Where Wages Are Earned

Harbor Pilots of NY NJ, LLC v. Bourchard Transportation Co., 2020 WL 4207572 (D. MD 2020)

Summary

This Maryland case is relevant to wage garnishments directed against Florida debtors employed by national companies or employed outside of Florida. The issue is a conflict of law question of whether a creditor properly can bring a writ of garnishment in (1) the state where the employer is headquartered, (2) the state where the employee performed services, or (3) the state that issued a judgment.

This Maryland court said that a writ of wage garnishment affects a debtor’s wages earned in the state where the debtor actually worked to earn the wages.

Practical Advice

A debtor can cite this case to defeat wage garnishments brought in other states where the debtor has not actually earned the money subject to garnishment. As of this date, there is no Florida case directly on point.

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