How to Protect Your Assets After a Car Accident
Many people first become concerned about asset protection after they cause a car accident. In Florida, both the driver and car owner are liable for damages when the driver causes a car accident that injures another person. People may worry about getting sued after a car accident, and they want to know how to protect what they have from a potential judgment.
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. An insurance settlement includes a release of the car driver and owner. 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 or the defendant appears to have substantial unprotected assets. When the at-fault driver and car owner maintain an insurance policy with inadequate 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.
Defendants with inadequate insurance need properly planned asset protection to avoid collection on a personal judgment and to improve their negotiating position during the settlement process.
To protect your assets after a car accident, you should:
- Discuss with the insurance carrier whether the likely damages are within insurance policy limits.
- Determine which assets are protected from collection should the injured person win 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.
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. The judgment creditor can take the debtor’s deposition under oath and obtain detailed information about the debtor’s assets and financial history.
Therefore, planning to hide assets from a potential judgment creditor is not a good asset protection plan.
Writs of garnishment directed against the defendant’s bank accounts and their wages are usually the plaintiff creditor’s most effective tool to collect money following a car accident judgment. 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, a bank will freeze all bank accounts that include the debtor’s name on the account title.
The bank must file a formal response to a writ of garnishment 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 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. 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. 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 in good shape 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.
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 information about the defendant’s assets to decide if they should settle within insurance policy limits or pursue the defendant for a money judgment.
No law in Florida requires the at-fault car driver to submit an asset affidavit. That said, sometimes the financial affidavit is helpful. The defendant wants to demonstrate 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 their asset protection situation before submitting an affidavit. An affidavit is signed under oath, and the defendant does not want to intentionally falsify asset information on the affidavit. The defendant can employ asset protection tools to increase protection first and then send in the affidavit.
The at-fault driver’s best course is to review their asset protection status, fix any issues, and then consider 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.
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. 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 house situated on a half-acre lot in a city and 160 acres in an unincorporated county. There may be other exemptions that protect the at-fault driver’s house, including tenants by entireties protection.
What Happens When Car Accident Claim Exceeds Insurance Limits in Florida?
When auto accident damages exceed the driver’s insurance limits by substantial amounts, the plaintiff may elect to turn down a quick insurance settlement and sue the driver. The plaintiff must prove in court the defendant’s liability, and the plaintiff must prove that they suffered damages commensurate with their claim. Anything is possible in a court of law and jury trial; the jury award may be less, or more, than what the insurance company offers.
When the injured plaintiff chooses to file a suit instead of accepting an insurance settlement, the lawsuit could result in a judgment against the driver and owner for an amount above the insurance policy. In the event of an excess judgment, the insurance provider still pays up to the amount of the policy, and the plaintiff will try to recover the balance of the judgment from the defendant’s personal assets.
The most likely scenario for a car accident lawsuit is when (1) the insurance policy limit is low compared to the damages incurred and (2) the liable parties (at-fault driver or owner of the vehicle) have a substantial amount of assets at risk of collection.
Being Sued for a Car Accident When You Have No Assets
Lawsuits are expensive and time-consuming. The vast majority of car accident plaintiffs and their lawyers prefer a quick and easy insurance settlement, no matter how small, rather than filing a lengthy, expensive, and risky lawsuit against someone that does not have any assets.
The same 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, there is no limit on the amount of compensation that someone can sue for as because of a car accident. However, the amount must be documented and supported by evidence of damages. Car accident damages include medical bills, pain and suffering, loss of future earnings, and ongoing damage for loss of functioning.
It does not matter if the injured person has medical insurance. Medical bills (which can be very high) are included in the amount of damages. Effective asset protection may be able to protect your assets from a claimant.
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. The liability of the car owner is capped at $600,000 pursuant to Florida Statute 324.021. 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 or settles?
In most cases, a person cannot sue you after your insurance pays the plaintiff. If the at-fault driver’s insurance company settles with the injured person, the settlement documents will include a release of all claims. A release means that the injured person cannot afterward sue the at-fault driver or the vehicle owner.
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.
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. They can use various judgment collection tools to collect on their judgment.
However, proper asset protection planning could make it difficult for the judgment creditor to collect on their judgment. Florida residents have available some of the strongest asset protection tools in the country.
What happens if someone sues you for more than your insurance covers?
If an injured person wins a lawsuit against you for an amount more than what your insurance covers, your insurance policy will still pay the amount of the liability policy limit toward satisfaction of the judgment. You would be responsible for the balance of the monetary judgment. However, effective asset protection makes it difficult for the injured person to collect on the balance of the judgment.
Do you have to provide a financial affidavit after a car accident?
No. Florida law does not require you to complete a financial affidavit for your insurance company or for the injured person. However, in most cases, a financial affidavit that shows you are not wealthy and that you have few non-exempt assets helps the plaintiff’s attorney convince their client to settle the claim.