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 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 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.
Defendants with inadequate insurance need properly planned asset protection to avoid collection of a personal judgment and to also 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.
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 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 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.
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 car 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.
Soon after a car accident, an insurance company may request that an insured defendant fill out a financial affidavit. The request for a financial statement is usually 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 within 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 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.
Car Accident Liability Questions
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 includes the person’s 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 own medical bills. The amount of the medical bills (which can be very high) are still included in the amount that the person can sue for.
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?
If the at-fault driver’s insurance company reaches a settlement 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 afterwards 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 insure 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.
Last updated on August 13, 2021