How to Protect Your Assets After a Car Accident
Many people become first 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 and the other driver suffers permanent injury.
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 getting the most amount of 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 there the driver and owner car low insurance protection the injured person may decide that he can collect more money through litigation and a money judgment than through an insurance settlement. Defendants with inadequate insurance need properly planned asset protection to avoid collection of 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 collection of a money judgment would be difficult.
Plaintiff’s Collection Tools After Judgment
Florida law provides a judgment creditor various tools to collect a personal money judgment from a car accident. 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 which 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 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. Wages 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 that are 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 they are 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.
Soon after a car accident is an insurance company may request that insured defendant fill out a financial affidavit. The request for a financial statement usually is made by the plaintiff or his insurance company. The plaintiff and insurance company want to know about the defendant’s assets in order to decide if they should settle for insurance policy limits or pursue the defendant for a money judgment.
There is no law in Florida that requires the defendant car driver to submit an asset affidavit. That said, sometimes the financial affidavit is helpful. If the defendant can demonstrate to the plaintiff that collection of a civil judgment would be difficult the plaintiff is more likely to settle for insurance 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 legally to take asset protection action 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.
What to Do Next
You may wish to review your financial situation with an attorney to determine what assets are at risk of collection should the injured person decide to file a lawsuit against you. Fortunately, we are able to help most clients protect any exposed assets so that, even in a worst-case scenario, their family income and assets are protected against a potential creditor. Contact our office to get started.
Last updated on July 30, 2020