Once in a while I am contacted by creditor attorneys who are trying to collect a judgment from a debtor who had engaged in asset protection planning. They want to know what tools I have seen creditors successfully use to penetrate my own client’s asset protection planning.
During the past month a California attorney contacted me because he wanted to know if he could prevent a California defendant from selling his house and moving to Florida to reinvest the money in a Florida homestead. He says the defendant has entered in to a contract to sell his primary home in California worth over $1 million, and he understands that the defendant will relocate in Florida.
He is looking for a way to slow down the defendant’s move and possibly collect the money before it is moved to Florida. He understands a court cannot prevent anyone from traveling to another state in a civil litigation context.
I have seen creditor successfully obtain temporary injunctions against debtors to stop, or slow down, the debtor’s transfers of funds in to asset protection entities. California has a low homestead exemption so this debtor’s sale proceeds will be mostly non-exempt. The creditor could seek a temporary injunction against the debtor individually preventing him to transferring or investing the house proceeds. The injunction would not seek to stop the sale, just stop the movement of non-exempt sale proceeds. The creditor would have to allege elements necessary for injunctive relief, such as irreparable harm of moving funds outside California jurisdction.
I’ve seen courts some grant these injunctions pending a full hearing on a permanent injunction; I’ve also seen courts deny this relief because the creditor could not prove need for this extraordinary relief. I think in this instance, where a debtor soon will have liquid assets that can me moved anywhere in the world, a petition for injunctive relief may be the creditor best chance of capturing the funds.