Florida Asset Protection Blog

When Are Transfers Subject To Attack As A "Fraudulent Conveyance?"

Many people tell me they are planning transfers that they do not think will be challenged as a fraudulent conveyance because no creditor has yet to file a lawsuit. For fraudulent conveyance issues the important event is not the lawsuit or judgment, but it is the creation of a claim. Fraudulent conveyance statutes address creditors’ “claims” not creditor lawsuits or creditor judgments. “Claim” is defined by the statutes. A claim means a right to payment, whether or not the right is reduced to judgment, is liquidated, fixed, contingent, disputed etc. A transfer of assets made even under the vague shadow of a potential claim is subject to attack as a fraudulent transfer under Florida Statute 726 even though substantial time passes before a lawsuit if filed or judgment awarded.

Thinking About Hiding Assets Overseas?

From time to time people ask me about using asset protection tools to hide assets from creditors or former spouses. Some people believe asset protection tools can be used to hide income from the IRS. My standard response is that asset protection is not asset hiding, and that current technology precludes secrets. To illustrate my point I invite those harboring images of asset secrecy to visit a relative new blog written to help creditors discover hidden assets here and overseas. The blog is called “The Asset Search Blog” edited by Fred Abrams, www.assetsearchblog.com.

Mr. Abrams uses sophisticated methods and his personal contacts to help uncover assets anywhere in the world. Some of his entries debunk common myths such as the absolute secrecy of Swiss bank accounts. Read the blog before you devise schemes to hide assets.

posted by Jonathan Alper, asset protection and bankruptcy attorney, Orlando, Florida

Avoiding Wage Garnishment In A Closely Held Small Business

Unmarried debtors who do not support minor children or a spouse are not exempt from wage garnishment. Where such debtor is involved in a closely held small business there may be planning opportunities to protect from garnishment periodic receipts from the business. Small business can pay some of its key personnel either as salaried employees or as independent contractors. The payment method and employment characterization of the key employee may have income tax consequences, and it may also affect the protection of compensation from judgment creditors.

Salary paid to an employee and periodic payments to an independent contractor are both subject to garnishment by the judgment creditor. The difference is that Florida law permits a continuing writ of garnishment of salary. By serving the initial writ of garnishment on a small business employer, the creditor gets a perpetual garnishment of all future salary payments. Florida law does not permit continuing writs of garnishment of payment to independent contractors. So, if a small business pays its key employee as an independent contractor a judgment creditor of same key employee would have to obtain separate writs of garnishment each time the employer was to make payment. It would be very difficult for the creditor to anticipate payments to the independent contractor and to serve a writ prior to each payment.

Therefore, a debtor who is not head of household is better off being compensated as an independent contractor rather than as a salaried employee.

posted by Jonathan Alper, asset protection and bankruptcy attorney, Orlando, Florida

Fraudulent Conveyance Avoided In Conveyance To Non-Debtor Spouse

I have cordial professional relationships with a few creditor attorneys. Sometimes, a creditor attorney who is representing a debtor client invents interesting asset protection strategies. Mr. Larry Kosto of Orlando, Florida, is one Florida’s best collection attorneys. Larry says that he represented a debtor who owned assets jointly with his spouse which assets, for one reason or another, could not be deemed protected tenants by entireties assets. He came up with an interesting plan to transfer the joint assets to the non-debtor spouse and avoid fraudulent conveyance.

Although the joint assets could not legally qualify as tenants by entireties assets either spouse, individually, had the right to convey the entire asset. Mr. Kosto suggested that the non-debtor spouse initiate the conveyance to her own name without the joinder of the debtor spouse. Mr. Kosto argues that fraudulent conveyance statutes specifically refer to transfers by “the debtor” of non-exempt assets to other people. In his case, since the debtor did nothing to accomplish or implement the transfer (at least, directly) Mr. Kosto argues that the creditor cannot fit the non-debtor spouse’s actions within the statutory definition of a fraudulent conveyance. A creditor may argue that the non-debtor spouse was acting as the agent or even the alter-ego of the debtor in making a transfer with the debtor’s knowledge and consent. I don’t know of any court decisions addressing this strategy.

posted by Jonathan Alper, asset protection and banrkuptcy attorney, Orlando, Florida