Once in a while we get a case where someone is asking about ways to protect future assets from existing judgments. The answer to this question, in short, is that if you have a judgment against you personally and the assets you’re owed in the future will rightfully accrue to you personally as well, it’s almost impossible to protect those assets.
Early Negotiation: An Asset Protection Strategy
In an earlier article on how to protect assets against lawsuits we talked about the benefits of being judgment proof. In the case of people who are concerned about protecting future assets from existing judgments or creditor claims, it’s a safe to assume that there probably aren’t very many assets to protect currently. As much as that might seem like a bad thing, it actually creates a good opportunity for you. Here’s what I mean: If you honestly don’t have assets to satisfy a judgment against you, your creditors have a choice between (1) waiting to see what happens and (2) taking what they can get.
If you have a reasonable expectation of personally receiving assets in the future (but don’t have many assets “on paper”), then it would be extremely wise to attempt to negotiate the current claim against you. Your creditors will likely prefer to take a known lesser amount than to continue waiting (and incurring legal fees) indefinitely. In other words, if your creditors see that you don’t have much, it’s very possible that they’ll take anything! In short, this use of timing and strategy can be a very effective asset protection tool.
When It Works
If you can successfully negotiate a settlement, if you can get your creditors to accept a lesser amount of money than what you actually owe, then reduce it to an agreement to pay or some other form of promissory note. Once it’s in writing as a settlement of existing debt, the creditors won’t be able to attack your future assets. The trick is to get all your claims settled and off the table (not necessarily paid in full) before you receive assets in any substantial amount.
The next most important thing you can do is put together an asset protection plan that is capable of receiving and holding the assets that you acquire in the future. The fact that you have had a judgment rendered against you already should be a wake up call. Don’t put additional, future assets at risk. If you have questions about setting up an asset protection plan, please contact an asset protection lawyer to discuss your situation.
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