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Real estate values will decrease again, if they haven’t started to decline again already. This is evidenced by a number of conversations we’ve had with asset protection clients of Lodmell & Lodmell recently.  The purpose of this article is to help you make the right decision with respect to real estate as a part of your overall asset protection plan, especially properties that might be primed for a strategic default. Here’s what you need to know.

Bankruptcy Should Be Your Last Resort

Many mortgage “assistance” companies advise their customers to declare bankruptcy rather than pursuing a short-sale of financially troubled properties.   The logic of their advice is simply that by filing bankruptcy and losing property through the bankruptcy process eliminates the possibility of a default judgment. Many bankruptcy attorneys offer similar advice, believing that the wiping out the possibility of a default judgment is most important.

The fact is that mortgage deficiency judgments, especially now, are uncommon at best.  Several states do not allow deficiency judgments at all. Even in states where deficiency judgments are permitted, banks normally settle such claims for pennies on the dollar.  But that still doesn’t eliminate the possibility of a deficiency judgment in some circumstances, so why should bankruptcy be the last resort?

For one, the exemptions available under state law are often much more beneficial to you than the exemptions available under the federal bankruptcy code.  That means that even if you get sued for a deficiency judgment under state, there is a good chance that your assets will be better protected under state law than they would under the bankruptcy code. Of course, if you have an asset protection plan in place, most if not all of your assets can be protected.

When All Else Fails—Strategic Asset Protection Moves

The beauty of using bankruptcy as a last resort is that you never foreclose the possibility of declaring bankruptcy at some point in the future.  You will, however, be stuck in the bankruptcy system once you file, so it makes sense to wait and (1) see if your lender will even pursue a deficiency, (2) negotiate the amount of any deficiency claim, and (3) determine what assets would be available to settle such a claim inside and outside of bankruptcy proceedings.

Your best bet is to wait on filing bankruptcy until your lender files suit against you, obtains a judgment, and seeks to garnish your wages or otherwise actually attempt to collect on the judgment. Otherwise, you will almost certainly be better served by not filing bankruptcy.  If you have any questions about this topic or any other asset protection topic, please feel free to give us a call.

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Pashmina Lalchandani

CEO & Co-Founder, Bar & Cocoa / Owner, Flow Simple
December 9, 2010, Douglass was a client of Pashmina’s

I’ve known Doug in many contexts, as a friend, as a client and as a business partner and he impresses me on all levels. He’s dependable, smart, generous and I wouldn’t hesitate recommending him and his law firm to anyone.
He’s the best and most ethical lawyers providing asset protection with rock solid strategies to give you peace of mind about your wealth. Straight forward, and straight talk. Doug is exactly the lawyer I want on my side. If I send someone to Doug, I know they’ll thank me for it!

Social & Solar Entrepreneur, Pan Afrikan Theorist, Translator/Interpreter,
Founder & Visionary Leader @ Afrikanpride.
March 12, 2011, Marlon E. D. J. worked with Douglass but at different companies

Doug is one of the most powerful thinker i have came across. During the short time that i have known Doug he has been a great source of inspiration. He has a simplistic yet effective and accurate way to analyze anything you bring to his attention, and then by asking you key questions he gets you to see the light at the end of the tunnel. Besides being extremely bright, he is a genuine and caring individual which is why I feel fortunate to know him. I can say without a doubt that he his the person you would want to talk to if you were in need of a person with his expertise.
Most of the lawyers out there will probably meet your needs, but if you are looking for someone to exceed your expectations and give you that wow factor, look no more he is the person for the job.

Patricia Salter

Associate Dentist at Smileology
December 1, 2010, Patricia was a client of Douglass’

I have been a client of Douglas Lodmell’s since 2001. My main concern was asset protection in this litigious society. I can sleep alot better at night knowing I have the instruments in place to protect the fruits of my labor, and that they will not end up in the hands of a slick trial attorney.

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