Can a Creditor Take Your House?
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Unless you have a valid defense, you could lose the lawsuit, which results in a personal judgment. If someone sues you and you do not respond to the lawsuit, the judge can grant a default judgment. The default judgment states that you owe a specific amount to the creditor. Most states allow the creditor to charge interest on the judgment amount until it is paid.
Large Claims vs Small Claims Courts
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Therefore, asset protection in the context of marriage requires a strategy. The valuable assets are as a “separate” property of the spouse with the least exposure to risk. This is where a marital property agreement (i.e. a prenuptial or postnuptial agreement) can be beneficial. If the spouses can agree that certain assets will be the separate property of the spouse with less exposure to lawsuits. It will be important that you maintain the ability to live in your home even when it is in the asset protection plan.
How Much Does It Cost to File a Lawsuit?
If your ownership of your home changes from full and complete to something less, your interest may have no value to a prospective creditor. The party named as the defendant in the lawsuit must have caused the harm. The harm must also be a type that is recognized by the law and for which the law provides redress. In November 2022, voters approved a tax on properties that sell for $5 million or more.
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Can A Trust Be Sued?
If your income can’t be garnished and you don’t own valuable property that isn’t protected by an exemption, you’re considered judgment proof. While you can get sued, not even a judgment creditor can seize exempt property from you. With respect to personal property, most states have specific exemptions for specific types of property. Most protect typical household goods, health aids, clothing, and a motor vehicle up to a certain value. Federal law protects Social Security and disability benefits from debt collectors (with or without a judgment). The amount of time you have to answer the summons is determined by the law in the state where the lawsuit is filed.
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Approximately, twenty-one states even require that a home owner file appropriate paperwork to qualify for the exemption. Most of us have been taught for years that it is a wise long-term policy to pay down our mortgage (pay off our home). Many people view paying off their home as the pinnacle of their lifetime’s work. Regrettably, a creditor or plaintiff will view this as the “golden egg” in his or her efforts to collect a payment from you in a lawsuit.
How Do I Choose the Proper Venue for Filing My Lawsuit?
Sometimes we reverse this arrangement if the circumstances are appropriate. Rather than reserving a right to live there for a period of years, the PRT can provide that the home belongs to the trust but can be leased back to you for a period of years. Although you would pay rent to the trust, the usual tax benefits would apply because of the grantor trust rules. At the end of the term of the lease, full ownership could be returned to you or passed to your children.
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If you get sued and have no money or assets, a judgment may be entered against you. On the other hand, if the assets were properly transferred and the trust was not involved in the debt, it might be protected. For example, creditors might sue if they believe the trust was created to fraudulently shield assets. However, successfully suing and accessing the trust’s assets depends on the specific reasons for the lawsuit and the terms of the trust. If someone believes they have a valid claim against the assets or the management of the trust, they can take legal action. Here are other questions clients ask us about protecting their assets from a lawsuit.
What Money Is Protected From a Lawsuit?
If your county does not have a site like this, then also try looking up your name with the word “lawsuit” behind it. While this might not show anything relevant, if a lawsuit has been filed, there is a small chance that it is available to the public online. Florida’s homestead law also protects the transfer of the home upon the death of the owner. The homestead does not become part of the probate estate and will pass to heirs or trust beneficiaries free and clear of any judgment liens. Essential reading for every professional, business owner and potential deep-pocket lawsuit defendant. Your lawyer can also help negotiate a settlement with the other party or represent you in court if necessary.
When someone sues you and gets a personal judgment, some states allow creditors to garnish your wages to collect the debt. The creditor typically must petition the court for a wage garnishment order. Once your employer receives the order, it must begin garnishing your wages for the amount in the order. Depending on where you live, creditors might have several options for collecting personal judgments.
I don’t even include the LLC in my 6 options to better protect your home. It truly is our “castle,” but can also be one of our most vulnerable assets. Although we need to protect it at all costs, we face several dilemmas that create significant hurdles to protecting the complete value of our home from a lawsuit. No, oftentimes if you are sued, the individual will not be able to take your house.
Amy also has extensive experience editing academic papers and articles by professional economists, including eight years as the production manager of an economics journal. Individual retirement accounts and other non-ERISA plans have varying levels of protection under state law. Once you take a distribution from a protected retirement account, you may lose creditor protection. However, these protections generally don’t apply when the lawsuit is related to a divorce. For example, if you own a business and it is being sued, both your business and personal assets could be at risk, depending on where your business is located and how it’s structured. For example, you may perhaps own certain assets or property which have been a part of your family for generations.
If, on the other hand, you are overly reckless then yes, of course, creditors are free to seek damages from you and that puts all of your assets, including your personal property, at risk. So next we’re going to look at the different types of lawsuits that you can run afoul of, before looking more in-depth at ways to keep both your personal and business assets as safe as possible. In some situations, one spouse may have a “risk issue” with their lifestyle or business and removing their name from title of the home could help protect it.
Use our free Debt Relief Calculator below to see what options you may have moving forward. The answer to this question depends on a number of factors, including the reason for the lawsuit and the laws of the jurisdiction in which the lawsuit is filed. I graduated with honors from Emory University Law School and have been practicing law for almost 15 years. Florida law protects homestead property up to 1/2 acre in a city or 160 acres in an unincorporated county. For properties in the unincorporated county, the protection is not limited to a single parcel.
Glenn’s car accident changed his life, but not permanently thanks to the help of his Rutter Mills attorney. When the insurance companies wouldn’t help him, our team fought back and won. The defendant’s insurance company tried to offer him a low amount so Dave called Rutter Mills.
It’s legitimate and difficult for a creditor to challenge in court and ‘step in front’ of a valid lien holder on the title to your primary residence. Vacation homes, temporary homes, and homes under construction are not protected. A property that you intend to make your homestead later on is not protected.
It can go either way, depending upon your view of any future potential liability you may have. However, many jurisdictions have homestead exemptions that protect a portion or all of the value of your primary residence from creditors. Many types of income are protected by exemptions and can’t be garnished. Federal benefits — such as Social Security, disability, and veteran’s benefits — are fully protected from garnishment by federal law. After her car accident, Larena asked her father, a local stevedore, for his advice on who to call.
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