Making Yourself Judgement Proof

Discussion in 'Credit Talk' started by Flyingifr, Aug 28, 2003.

  1. Flyingifr

    Flyingifr Well-Known Member

    Protecting Yourself from Creditors

    Your creditors want your money. They want it NOW, and they probably want it ALL. The fact that you have some of earmarked for such foolish expenses as food, clothing and shelter doesnâ??t matter to them. This section of our web site will give you some hints on making it difficult or impossible for a creditor of yours, even if armed with a Judgement, to take your assets.

    The Creditorâ??s favorite target â?? your wages:

    Your income is your creditorsâ?? favorite target simply because, unlike a car or a bank account, wages can be attached time and time again until the debt is finally paid, or you leave that employer. Some states, like Pennsylvania and Texas, do not allow wage garnishments. Others, like Michigan, restrict each garnishment order to only one paycheck. After that paycheck has been garnished, the creditor has to file another garnishment order to collect again. Most states, however, allow a garnishment to remain on a paycheck until the debt is paid in full.

    Garnishment is the legal term for the court-ordered requirement that your employer withhold a part of your earnings and send that money to your Judgement-Creditor. While the exact percentage can vary from state to state, a Garnishment cannot ever leave you with less than thirty-five (35) times the Federal minimum wage. At this time the Federal Minimum Wage is $5.15 per hour, so your NET paycheck can not be less than $180.25 per week.

    Strategies to frustrate the garnishment:

    There is not a lot you can do to avoid a garnishment if your creditor has a Judgement and knows where you are working. Obviously, if you can, changing employers will stop the Garnishment. A creditor can only garnish a paycheck they can find. If they donâ??t know where you are working, donâ??t tell them. Donâ??t apply for credit, and donâ??t answer any questions they may ask. Just because a creditor asks a question does not man you HAVE to answer it. The ONLY exception to this is an INFORMATION SUBPOENA (see the link), which is a Court Ordered Questionnaire which you must answer under penalty of Contempt of Court. The good news is, in more than 30 years in this field, I have only found TWO collection attorneys smart enough to use an Information Subpoena.

    Another way to frustrate a garnishment is to load your paycheck with other deductions that take priority over the Garnishment, and that you will either have to pay or will get back at some future time. If you owe Alimony or Child Support, get them BOTH onto Payroll Deduction. Increase your Federal and State tax withholding. Try to get your pre-garnishment take home pay below the $180.25 Federal Minimum. If you owe Federal or State taxes, the excess withholding will pay those debts off earlier. If you donâ??t then the excess withholding will be refunded to you next February when you file your tax returns. Creditors generally cannot attach your tax refund. I realize it may not be easy to live on 180.25 a week, but thatâ??s what you will have to do to frustrate a garnishment.

    A large garnishment can be your best friend in states where garnishments stay in place until paid. Letâ??s assume ABC Company sues you for $15,000 and gets a judgement. They file a garnishment order with your employer. You earn $400 per week. Here in Arizona, where the Garnishment rate is 10% of Gross Income, that is $40 per week. Not counting interest, it will take 375 weeks (over 7 years) for the next company to get paid. Factor in the interest at 9% and #2 may never get paid. That information may just be enough to get all other creditors to negotiate a great settlement deal (more on how to do that later in this section) just to get SOMETHING rather than still be standing on line the day you retire. Then, after all your creditors have settled except ABC, you change jobs and leave ABC as your only creditor, and they canâ??t find your job to garnish. Of course, if a company YOU happen to own also happens to be garnishing your salary for a large debt owed, then the others will just have to wait in line.

    Strategies to frustrate Bank Account Attachment:

    Armed with a judgement your creditors can take your entire bank account â?? if they can find it. Here are some ways to make as sure as possible that doesnâ??t happen.

    When I was a bill collector one of my best routines was to send the debtor a check for $1.14. Accompanying the check was a letter saying we collected an illegal late charge. When the check came back in my bank statement I knew exactly where the debtor did his banking from the endorsement and stamps on the back. You can bet the next Friday that bank got a Seizure Order. For $1.14 (which I just added back onto the debtorâ??s account) I got several hundred dollars. The lesson is simple â?? donâ??t cash small checks your creditors send you. If you must, sign them over to a friend or relative and let THEM cash it (in a different bank where you bank, that topic is next).

    Bill Collectors routinely contact banks near where you live or work to find out where you bank. Many larger banks have an â??account locator serviceâ? that may or may not tell a bill collector if you have an account at that bank. If you live in a small town or small city where there are a limited number of banks, some bill collectors will just serve them all with a Seizure Order and see which one works. The solution is the Internet. I live in Tucson, Arizona and I do my banking in St Paul, Minnesota! The contents of that account is kept small, and most of my bank deposits are kept in a cyberspace bank. Let the bill collector find THAT. Follow this link for a list of Internet banks you can use.

    I do not recommend titling your accounts in your childrenâ??s names because if found out that could be construed as â??in fraud of creditorsâ?, which is illegal. Moving your banking to the other side of the world, in your own name, is perfectly legal.

    Strategies to frustrate Car Repossession:

    The rules here are different for the two types of repossessions. One type is when the Lienholder (the company on the title) repossesses the car and the other is when a Judgement Creditor repossesses.

    Lienholders are much more prone to repossess than Judgement creditors for two reasons. The first is that the Lienholder only has to cover about $350 to 500 in repossession and sale expenses before realizing money towards the debt. A Judgement Creditor has those expenses PLUS the full balance left on all liens on the car. The economics of a Lienholder repossession are much more creditor-friendly than that of a Judgement Creditor. Second, in dealer-arranged financing it is possible that the lender and the dealer have a side arrangement wherein if the car is repossessed before a certain number of payments are made, or at all, the dealer will pay off the loan and take over the debt. This is called â??Recourseâ? and you will not know if the loan is a recourse loan and what the recourse terms are. Judgement creditors have no recourse.

    Making your car safe from the Lienholder merely means that is one creditor you will have to pay. Making the car safe from other creditors means loading the car up with liens. I have a friend who actually put his dog, named Howard, on his carâ??s title as a lienholder. No sane judgement creditor will repossess a car with more than one lienholder on it. Considering that most people who owe money on their cars are â??upside-downâ? (meaning they owe more than the car is worth) with ONE lien, two mans they are not only upside down, but probably inside-out also. Soâ?¦. Get a friend or relative to give you a loan, and secure it with a lien on your car.

    Trusts â?? do they work?

    Many people feel establishing a Trust is the way to make yourself â??Judgement Proofâ?. A Trust is a legal entity that is established to perform certain specific functions. The most common purpose of a trust is to administer the assets of someone who died until they can be distributed to heirs. A Trust can either be revocable or irrevocable. The owners of this site caution you to NEVER establish a Trust without the advice of a competent Attorney and Tax Advisor. My experience is that Trusts are an expensive and often unsuccessful tool for this purpose. The reason is because most trusts not administered by professional Trustees become so â??transparentâ? that they cease to exist and a sharp lawyer can convince a judge that the Trust is â??in fraud of creditorsâ?. Let me define some terms:

    â??Judgement Proofâ? doesnâ??t mean you canâ??t be sued, and that a creditor cannot get a judgement against you. It only means that a judgement is useless against you because the judgement-creditor as no way to collect on the judgement. I like to compare a Judgement to a hunting license. Every year, millions of people buy hunting licenses. Not all of them are successful in the hunt. The license just gives them permission to look for a deer to shoot, it doesnâ??t guarantee a deer. Judgements are similar â?? gives a creditor the right to grab assets, if they can find assets. No assets, or assets out of reach of creditors is Judgement-Prof.

    â??Transparent Trustâ? means that the Trust has not been treated as a separate entity from its Grantor or Beneficiaries. As the Grantor (the person who set up the Trust) makes the wall between the Grantorâ??s affairs and the Trustâ??s affairs so thin that the wall eventually becomes transparent and nonexistent. â??

    â??In Fraud of Creditorsâ? is a transaction that is entered into with the sole purpose of making creditors unable to collect, and usually has little if any other reason. Timing is a key element in this â?? something done before default is far less likely to be considered in fraud of creditors than something done after the judgement is rendered against you but before the Sheriff can grab the asset.
  2. Flyingifr

    Flyingifr Well-Known Member

    Before you start asking where all the links are, I would like to point out that this whole series of articles (Understanding the Collection process, Understanding Collection Agencies and this) are part of a web site I am working on called "". The links will be on that web site. I will announce its opening here.
  3. pd11604

    pd11604 Well-Known Member

    Thank you for all thwe good advice!
  4. cashback

    cashback Active Member

    Anyone know what the garnishment rule in California?
  5. rhondak

    rhondak Well-Known Member

    Loved this post!

    I have one to add. In south carolina, where I live, the only garnishment allowed is for child support. No one can garnish your wages for any other debt or bill.

    Oh, and just a side note regarding "Howard". I have a friend here who got a second phone line - but it was cheaper to actually have a separate account, rather than add a second line to his existing account. So he got a phone under the name of his cat, Bob. Once Bob had his own phone, Bob began receiving credit card offers in the mail. I really don't know how many credit cards Bob has how, but it's quite a few.

    The irony of all this - my friend, Bob's owner, works for a finance company that specializes in loans to high risk people. (Oh and he owns the largest house in his subdivision which they are very proud of)

    Makes me wonder what Bob's CRAs look like.
  6. RichGuy

    RichGuy Well-Known Member

    This is great stuff!

    I know I've seen it before.
  7. Butch

    Butch Well-Known Member

    We have always provided the links right here, along with "barrowed" articles. Dragging traffic off to your own site before CN members to get this information is contrary to this custom.

    Further, to PROPERLY make oneself "judgement proof" is expensive. It requires that one have considerable assets to secure in the first place, otherwise the expense is cost prohibitive. This tactic hardly even applies to the vast majority of CN members.

  8. RichGuy

    RichGuy Well-Known Member

    Re: Making Yourself Judgment Proof

    Notice that flyingifr has his/her own definition of "judgment-proof." I'm sure this differs from Butch's more stringent definition.

    This looser definition of "judgment-proof" is simply that one can make judgments useless by not leaving any means or opportunity for successful plaintiffs to collect on their judgments. A purely practical definition, not a legal one.
  9. Flyingifr

    Flyingifr Well-Known Member


    These articles are not borrowed, I am the author of all of them.

    As I stated before, they are to be posted in a web site that is still under constriction, so the links haven;t been linked yet. many of them will be quite extensive - for example, in an article under construiction I mention filing suit in Small Claims Court. That will link to a State-by-State listing of the locations of small claims courts, along with the web sites of those who allow on-line filing of lawsuits.

    While I apologize to any Creditnetters who went looking for the links and couldn't find them (like the list on on-line banks that creditors are not likely to find) they are easily searchable on the internet.
  10. Flyingifr

    Flyingifr Well-Known Member

    Re: Re: Making Yourself Judgment Proof

    I agree with your analysis. All of my advice is based on my experiences as a bill collector, credit counselor and debtor (yes, I have worn all 3 hats) and is based not on theories but on "what works". I am sure credit netters would prefer advice useable in practice rather than in theory.
  11. Butch

    Butch Well-Known Member

    Ok ... in that case ... good job.

    I do hope we can avoid judgements in the first place.

  12. georgiaboy

    georgiaboy Well-Known Member

    Heres what a friend of mine did(John Doe), would you consider this to be pretty much judgement proof.

    Which it may not be judgement proof, but its dang sure confusing.

    John Doe filed articles of incorporation under the name of John Doe Inc.

    John Doe Inc, then summitted the proper paperwork to the state to D/B/A John Doe.

    So, my question would be, If John Doe faced civil suit, whom would the suit be filed against, John Doe, John Doe Inc, or John Doe?

    He also has 3 banking account, one for John Doe, one for John Doe Inc, and one for John Doe.
  13. Flyingifr

    Flyingifr Well-Known Member

    Re: Re: Making Yourself Judgement Proof

    What we have here is a case of someone being so smart they are probably being stupid.

    First of all, John Doe, Inc., a corporation, was organized for some business purpose. What is it? Managing the financial affairs of John Doe, personally? If so, when John Doe personally manages his affairs as John Doe, Inc., he becomes an EMPLOYEE of John Doe, Inc., and must pay himself a salary, along with the attendant payroll tax liabilities. So, in order to avoid creditors, he is exposing himself to one of the nasties and most persistent ones of all - the IRS.

    Second, since the corporation only manages Doe's personal affairs, it is a certainty that the corporate veil will be pierced. In a court action against Doe personally, when Doe personally tries to hide behind the corporation, the opposing lawyers will probably be able to show that the corporation is "in fraud of creditors" (see my original post) and is a sham.
  14. LKH

    LKH Well-Known Member

    Re: Re: Making Yourself Judgement Proof

    I found this exact article on Bill Bauers site. He usually puts a disclaimer on anything he borrows and there was none.

    So, I guess the question is, did Bill get the article from you, or did you get it from him?
  15. Rina

    Rina Well-Known Member

    Re: Re: Making Yourself Judgement Proof

    Where would "Pay what you owe" fall on your list?
  16. Butch

    Butch Well-Known Member

    Re: Re: Re: Making Yourself Judgement Proof

    Good catch LKH. Have you found anything else?

    To paste an article on CN, and claim authorship will certainly prove disastrous to ones credibility around here. I'll keep an open mind until we hear what Flying has to say about this.

    But in deference to Flying, (not that I owe him any favors) I do know that Bauer has copied MY WORK too, without attribution.

    What he doesn't know (yet) he's about to get served.

  17. J. Vick 71

    J. Vick 71 Well-Known Member

    Re: Re: Re: Making Yourself Judgement Proof

    I read this and couldn't beleive it from personal experience.
    "In more than 30 years in this field, I have only found TWO collection attorneys smart enough to use an Information Subpoena"

    I had 3 different ones and they were fill them out or contempt of court

    35 x federal minumun NET????????

    I have had my checks garnished before with a bad job they knew about NO NO NO!

    I have also gone to court to get money back that was taken when it shoudn't have been from wrong % or whatever.

    I am not even close to an expert on this.

    Which would be worse saying you copied this or that you wrote this???
  18. pnwman

    pnwman Well-Known Member

    Re: Re: Re: Making Yourself Judgement Proof

    Doesn't sound like Bill to me. Too direct. :)
  19. J. Vick 71

    J. Vick 71 Well-Known Member

    Re: Re: Re: Making Yourself Judgement Proof


    Increase your Federal and State tax withholdings?

    So when you file a tax return they can just take a bigger check?

    NET?????? Try again.
  20. sassyinaz

    sassyinaz Well-Known Member

    Re: Re: Re: Re: Making Yourself Judgement Proof


    You can't sue Bill, for what????? c'mon!!!!!!

    Link me please to where he's copied you.

    J Vick,

    Be prepared, these editorials (the series) are for kudos and high-fiving only -- comments on accuracy and especially confirmation of inaccuracies with the correct information, they TRY and cut you off at the knee-caps for:

    Thanks though, for bothering to check and confirm and provide the right information -- I, for one, appreciate it muchly!!!!!!!!


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