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Winter Park Florida business and civil litigation lawyer Eric Lanigan talks about what happens when a single person or a married couple faces wage garnishment due to a judgment. There’s a video that talks about the issue and some of the challenges and options for addressing the challenges on the LaniganPL YouTube video channel called, “Florida Wage Garnishment of Individual or Married Couple.”
How to Handle Wage Garnishment
Eric talks about garnishment in a range of difficult situations. Where you have a single debtor, unmarried, no children who has a judgment against them. Or you have the married couple but the judgment is against both of them. Maybe one spouse was the borrower and the other spouse signed as a guarantor. Or many times as most people know the bank will require both the husband’s and the wife’s signature in order to make a loan.
In those situations, you don’t have the head of household exemption, you don’t have the tenancy by the entireties exemption. In the married situation, you can have the head of household situation, but if both of the parties work then the one who makes the the least amount their account can be garnished. But you don’t have the tenancy by the entireties exemption if the judgment is against both the husband and the wife and that’s a critical exemption in Florida.
People often come in and they say, “well what do I do now? With a judgment against my wife and I, should I just transfer these assets into my parents’ name, my child’s name. Should I open a bank account in my children’s name and put all my money in there?”
You know you can’t do any of that because all of that falls under the guise of fraudulent conveyance. And a fraudulent conveyance is any transfer of assets out of your name for less than full value done for the purposes of avoiding the claims of creditors. And the courts tend to be pretty liberal in deciding when someone has a judgment against them that any transfers being made were being done to avoid that creditor.
Some people say, “well I guess I just have to bury it in my backyard.” And that may work for a while but unless you lie about it and commit perjury they’re ultimately going to find out where it is. Now obviously you say in Florida I certainly can’t put it in a bank account in my name or my wife’s name or both of us because they’ll be able to garnish that account. And that’s true.
But what if there was a state that didn’t recognize garnishment of bank accounts. In fact, specifically prohibited the garnishment of bank accounts except for tax liabilities owed to that state? You could then put your money in that bank account and it wouldn’t matter if the judgment creditor knew about the account or not because they can’t garnish in that state and it could be business, it could be personal. And what if somebody has a company and they’re self-employed and the company is also liable on that debt?
You might set up a new company, you might setup that new company in the state that does not allow garnishments. And the new company opens bank accounts in the state where it’s incorporated. It can come to Florida and be authorized to do business in Florida, but it’s not a Florida corporation and it wouldn’t have any money in Florida.
Now when you get into a transition from old company to new company, I want to caution everybody that to do that effectively to avoid the old judgment creditors, requires a great deal of planning and a great deal of precision. Because if you don’t hit the bulls eye, you lose.
So it’s got to be done right and it’s got to be done correctly but it can be done.
Well some people may say, “well if I open this account in another state wouldn’t that be a fraudulent conveyance?” And the answer is clearly no. You still own that bank account.
If it’s a husband and wife situation or a single person and they open the bank account, it’s their bank account just the same as a Florida bank account would be theirs. So they own it, they have not conveyed away anything. They still are the owner. And you can tell the judgment creditor, you can honestly answer the question, well do you own a bank account? Yes I do. It’s the first national bank of such and such in this other state. It doesn’t matter if they know because they can’t get it.
Asset Protection is the Answer
“I think that’s probably the essence of really effective asset protection,” said Lanigan who urges all businesses to have assets protected before starting a new business. “Asset protection is not lying about things. It’s not burying things in the backyard or playing hide and seek with things.
“Rather, it’s creating a strategy that places your assets in a place and in a way that you can tell people where they are. It doesn’t matter because they can’t get to them.”