Creditors Have Many Options Once They Have a Judgment Against You

Posted on September 21, 2009 by Ken Laino

An article in the September 20, 2009 Business section of the Cleveland Plain Dealer contains a good summary of the various remedies available to a creditor who has a judgment against you.  Cleveland Plain Dealer columnist Sheryl Harris is discussing a $3,000 judgment obtained in a small claims court in Rocky River, Ohio; but the alternatives she outlines would be just as applicable to a $3 million judgment in Ohio and many other states.

Here are a few of the things a judgment creditor may be able to do:

  • Garnish your wages
  • Attach your bank accounts
  • File a lien against your home and/or other real estate that you own
  • Force a sale of your home and/or other real estate that you own
  • Attach your personal property

There are of course limits on these remedies.  A creditor can garnish only a certain percentage of your wages.  As I have discussed in other posts, a small portion of the equity in your home will be protected in Ohio pursuant to Ohio Revised Code Section 2329.66 (while states such as Florida and Texas protect almost all the equity in your home).  It may be possible for the creditor to seize the full amount of your bank accounts, up to the amount of the judgment against you.  Transferring assets after a judgment has been entered (or even after a lawsuit has started) will likely be a prohibited fraudulent conveyance under Ohio Revised Code Section 1336.04 and similar statutes in other states.

The situation that columnist Sheryl Harris is writing about sounds like one in which we would all be rooting for the creditor.  The creditor is trying to collect on a judgment against a roofing company that failed to make proper repairs.  In many cases, however, I am representing a potential debtor.  And in those situations I want to lawfully protect the assets of that person or entity to the greatest extent reasonably possible under applicable law. 

The Cleveland Plain Dealer article is a good reminder that while debtors have many rights, so do creditors.  Asset protection attorneys must have a thorough understanding of the rights of creditors.  When an attorney is working to protect your assets, he or she must be knowledgeable about the various techniques that can be used to seize those assets.

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Personal Asset Protection for Physicians

Posted on September 1, 2009 by Ken Laino

Whether you are a physician in private practice or working for a hospital or other health care organization, you should consider some basic steps to protect your assets.  Here are a few suggestions:

  1. Maximize contributions to IRA's and other qualified plans.  Assets in IRA's and qualified employee benefit plans are generally awarded special protection from creditors.  Many plans (including 401(k)'s) are also protected in bankruptcy because they are not considered part of a bankruptcy estate.  The Bankruptcy Abuse and Protection Act of 2005 limits the IRA exemption in bankruptcy to $1,000,000 adjusted for inflation.
  2. Consider some life insurance strategies.  In many states death benefits from life insurance, as well as the cash value of a life insurance policy, are exempt in whole or in part from claims of creditors of the insured.  In Ohio, for example, under Ohio Revised Code Section 3911.10, insurance death proceeds are exempt by statute if paid to the spouse, children or certain other designated beneficiaries.
  3. Consider various trust arrangements.  Not all trusts provide asset protection, but some do.  For example, irrevocable life insurance trusts (ILITs) can be a great estate planning tool and can also provide significant asset protection.  If the ILIT is formed properly creditors of both the person who set up the ILIT and the beneficiary should have no rights in either the cash value or the death benefits of the insurance. 
  4. Split assets between spouses.  Simply dividing assets between spouses may offer some protection.  As I have explained in another post, holding property as joint tenants is generally not the best strategy from an asset protection standpoint.
  5. Focus on your principal residence.  Some states (Florida and Texas in particular) provide special protection for your principal residence against claims of creditors.  Ohio, however, provides a so-called homestead exemption of only $20,200 pursuant to Ohio Revised Code Section 2329.66.  Strategies for protecting your home from creditor claims therefore vary from state to state.

Many of these considerations are applicable to anyone who has accumulated assets that are worth protecting.  Since physicians (especially those in certain specialties) are far more at risk than many other people, they generally have a greater need to focus on asset protection.

 

 

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