Car Accident Asset Protection in Florida
How to Protect Your Assets After a Car Accident
Many people first become concerned about asset protection following their involvement in a car accident. In Florida, both the driver and car owner are liable for damages when the driver is at fault in a car accident that injures another person. People are therefore worried about getting sued after a car accident and how to protect what they have from a potential judgment.
Quick Summary
- It is usually not too late to protect your assets even after a car accident.
- Most claims settle for within insurance policy limits, unless the limits are low and the amount of assets at risk is high.
- Creditors often will demand that the insured person fill out a financial affidavit before settling a car accident case.
What to Do If Someone Sues You for a Car Accident
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. 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. When the at-fault driver and car owner maintain an insurance policy with low 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.
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Steps to Take
Defendants with inadequate insurance need properly planned asset protection to avoid collection on a personal judgment and also to improve their negotiating position during the settlement process.
In summary, an at-fault driver or car owner should take the following steps if they anticipate personal legal liability from a car accident:
- Discuss with the insurance carrier whether the damages are likely to be within insurance policy limits.
- Determine which assets are protected from collection should the injured person file a lawsuit.
- Implement a plan to better protect vulnerable assets.
- Submit a financial affidavit that demonstrates that the collection of a money judgment would be difficult.
Protecting your assets involves taking advantage of the many protections provided by Florida statutes and common law as soon as possible.
Important: Avoid making sudden transfers of assets after a car accident in an effort to shield the assets from a potential lawsuit. Such transfers if done improperly could be deemed a fraudulent conveyance.
Plaintiff’s Collection Tools After a Car Accident Lawsuit
Florida law provides a judgment creditor with various tools to 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. In addition, the judgment creditor can take the debtor’s deposition under oath and inquire detailed information about the debtor’s assets and financial history.
Therefore, planning to hide your assets from a potential judgment creditor is not a good asset protection plan.
Writs of garnishment are usually the plaintiff creditor’s most effective tool to collect money following a car accident judgment. A creditor can garnish the defendant’s bank accounts and his wages. 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, the bank will freeze all the debtor’s accounts.
The bank must then file a formal response 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 may 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.
Example of Asset Protection After a Car Accident
George is married with two minor children in north Florida. His older child, who is 16 with a learner’s permit, was driving a family vehicle and caused an auto accident. The car that the older child was driving was titled in George’s name. George has insurance on the vehicle with a $10,000 per person limit for personal injury. Now he receives a letter from his insurance company that a person injured in the auto accident has made a claim against himself for the full policy limit.
George works full-time and makes about $100,000 per year. His wife also works and makes $60,000 per year. They live mostly paycheck to paycheck, so they do not have much savings in the bank. However, both George and his wife contribute the maximum amount to their 401k every paycheck, so they have both saved a lot there. There’s also another car that’s fully paid off in his wife’s name.
In this example, George is potentially liable for the injured person’s damages because George owned the car that his older child was driving. George’s wife is not likely liable, but she could be if she signed the child’s learner’s permit application.
Regardless, George and his family are probably OK without needing to take further asset protection steps. George’s salary is protected because he qualifies for the head of household exemption in that he financially supports his two minor children. One concern, however, is that George’s head of household exemption may expire once George no longer financially supports his children. While George makes more money than his wife, he does not make so much more than he would still qualify as head of household for exemption purposes.
George’s 401k is protected from creditors under both Florida and federal law. While his wife has a car that is paid off, the car is not a collection target so long as his wife is not liable for the injury.
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 to know about the defendant’s assets in order to decide if they should settle within insurance policy limits or pursue the defendant for a money judgment.
No law in Florida requires the defendant car driver to submit an asset affidavit. That said, sometimes the financial affidavit is helpful. Suppose the defendant can demonstrate to the plaintiff 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 his asset protection situation before submitting an affidavit. The defendant can employ asset protection tools to increase protection and then send in the affidavit. There are ways to legally protect assets even after being at fault for a car accident.
The at-fault driver’s best course is to review his asset protection status, fix any issues, and then perhaps submit a financial affidavit. A well-planned financial affidavit can increase negotiating leverage leading to a settlement that avoids a lawsuit.
Tip: Florida has some of the most generous asset protection laws in the entire country.
How Often Do Auto Accident Settlements Exceed the Policy Limits?
Auto accident settlements do not often exceed the policy limits of the insured person. However, sometimes the injured person and the personal injury attorney demand a settlement amount in excess of the policy limit.
This situation can happen if both the policy limit is low compared to the damages incurred and if the liable party (at-fault driver or owner of vehicle) has a substantial amount of assets at risk of collection.
Being Sued for a Car Accident When You Have No Assets
For people that have little to no assets, it is unlikely that the injured person and their attorney will sue you. Lawsuits are expensive and time-consuming. The vast majority of car accident plaintiffs and their lawyers would much rather take an easy insurance settlement, no matter how small, than to file a lengthy, expensive lawsuit against someone that does not have any assets.
The same analysis 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
How much can someone sue for a car accident?
In Florida, the amount that someone can sue for as a result of the car accident is however much the injured person has been damaged. Damages in a car accident context include medical bills, pain and suffering, and ongoing damage for loss of functioning.
It does not matter if the injured person has medical insurance to pay for their medical bills. The medical bills (which can be very high) are still included in the amount that the person can sue for. Effective asset protection may be able to protect your assets from a claimant.
Can you lose your house due to an at-fault car accident?
In Florida, you cannot lose your house due to an at-fault car accident in most cases. While an injured person can sue the at-fault driver as a result of the car accident, the Florida homestead exemption, in most cases, will protect the home of the at-fault driver.
The homestead exemption protects an unlimited amount of value, but it is limited to a half-acre in a city and 160 acres in an unincorporated county. There may be other exemptions that prevent that at-fault driver from losing their house as well, including tenants by entireties protection.
Can someone sue you personally after a car accident?
In Florida, a person injured in a car accident is entitled to sue the at-fault driver and the owner of the at-fault driver’s vehicle personally.
Even if the at-fault driver has insurance, the injured person can still file a lawsuit for the amount of their damages against both the at-fault driver and the vehicle owner. While most car accident cases will settle within the policy limits, cases that do not settle can result in a lawsuit.
Can someone sue you after your insurance pays?
In most cases, a person cannot sue you after your insurance pays. If the at-fault driver’s insurance company settles with the injured person in a car accident situation, the settlement will typically include a waiver of all claims signed by the injured person.
That means that the injured person cannot afterward sue the at-fault driver or the owner of the at-fault driver’s vehicle.
However, in cases where the injury suffered is high and the insurance limit is comparatively low, the insurance company may pay the policy limit to the injured person without a waiver. In those cases, the injured person can still sue you if you caused the accident.
For how long can someone sue you after a car accident?
An injured person has four years after a car accident to sue the at-fault driver or the owner of the at-fault driver’s vehicle. The four-year timeline stems from Section 95.11 of Florida law, which lists the statute of limitations for personal injury in a car accident.
What happens if you lose a car accident lawsuit?
If you lose a car accident lawsuit in Florida, the injured person becomes a judgment creditor and can use various judgment collection tools to collect on their judgment.
However, proper asset protection planning could make it very difficult for the judgment creditor to ever collect on their judgment. Florida residents, in particular, can take advantage of some of the strongest asset protection tools in the country.