The Last Line of Defense

A recent article in this space advised readers to deal with short sale and other deficiencies pro-actively. That article expressed my concern about the immobilizing business effect on those who become burdened with judgments that last up to 20 years. The issue of what assets are exempt from the claims of creditors will become exponentially important in coming years as a result of current lawsuits and foreclosures.

Our firm has recently added Roy Hasseltine to deal this with and with business issues in general. Roy is entirely too young for his resumé. He has an LLM in tax with high honors from Alabama, was head of the business department at Lane College, is a former Alabama Municipal Judge, and is Past-President of the Alabama Municipal Judge’s Association. Roy contributes this article at my request:

Many of the original European settlers that came to America did so to avoid religious and financial problems in their prior country. The United States does not have a debtor’s prison, and you can’t be placed in jail merely because you can’t pay your debts. However your debtors do have legal authority to seize your assets for the payment of debts, subject to certain procedures and limitations. This article is to provide a brief look at limitations in the seizure of personal assets to pay debts.
First, no person is automatically entitled to take possession of your property unless they have a valid personal property security agreement (such as a car title) until there has been a judicial determination that the claim is valid. This determination of monetary obligations is known as a judgment, and can only be issued by a court after notice, generally personally served on you. Federal and state laws prohibit the seizure of certain assets through exemptions, and Florida has more generous protections from executions than most states.
Almost all IRA’s, retirement plans, and pensions are exempt from creditors. Although O.J. Simpson has a judgment in excess of $20 million, his creditors have not been able to attach his NFL pension of approximately $8 million. Florida has an unlimited exemption on the debtor’s homestead, which means a person cannot be thrown out of their home for the payment of a non mortgage debt. Discretionary income below $500 a week cannot be attached, nor ownership value of personal property in the amount of $4,000, if a homestead exemption is not claimed. Disability insurance proceeds, life insurance proceeds, insurance cash value, and medical devices are all exempt from execution, as is $1,000 of ownership interest in a single automobile. To receive the benefit of an exemption from creditors, an identification of exempt property must be properly executed and filed.

There are other, even broader, exemptions. Marital property, for instance, is exempt from claims where a judgment is against only one spouse. Property owned by an entity, or by a trust, may be exempt from claims where a judgment is taken only against an individual owner or beneficiary.

Put this article aside because someone you know needs it. But understand that it is entirely too brief, and if it’s all you know, in can be dangerous. Please use this article merely as an introduction to this area of the law. Get your legal advice from your lawyer.