Tuesday, August 14, 2012

Post-Judgment Proceedings & Asset Protection

Post-Judgment Proceedings: Preparation is Key Common mistakes in preparing an asset protection plan The Citation to Discover Assets proceeding –the last place an indivdual wants to end up. The lawsuit has been lost, liability has been determined, and you have ended up at the mercy of a judgment creditor. Experience has allowed me to group post-judgment defendants into two groups: those who have prepared for the worst and those who have not. You can spot the unprepared a mile away. They are the ones pacing up and down the hallways of the Daley Center, a sheen of presperation across their forehead with the tell-tale dark circles under the eyes. The Citation process for these individuals is painful. The creditor’s attorney will grill them about every single asset, bank account, credit card and source of income they have ever come across. At this point, bank accounts in their name have probably already been frozen, making it difficult for them to even hire an attorney to protect whatever little interests they may have. A word of wisdom – be prepared. The following are common mistakes that many people, especially entrepreneurs, make when trying to protect their assets. 1. Too little too late. Failing to plan prior to problems arising is the most frequent mistake people make when it comes to protecting their assets. Once a lawsuit has been filed, even before any liabilty has been determined, any transfers of assets from one entity to another can be scrutinized. For example, if during the course of a lawsuit against an individual that individual transfers his home from his personal name into an irrevocable trust or family limited partnership the court can rule this type of transfer to be a fraudulent conveyance. If a transfer is deemed to be a fraudulent conveyance, the transfer will be void and placed back in the original position and used to fulfill the creditor’s judgment. It is extremely important to initiate your asset protection plan early – long before potential creditor issues arise. 2. Using a one size fits all approach. An asset protection plan should be tailored to you and your business’s specific needs. A plan that worked for your neighbor may not be the right plan for you. Many people use the wrong entity structures – you should find one that fits your specific needs to gain the maximum protection from potential creditors while simultaneously giving you the best tax advantages. There are a variety of options out there – the limited liability company, irrevocable trust, private land trust, s-corporation, living trust, tenancy by the entirety and many more. All with unique characteristics appropriate for specific purposes. Find an attorney that will take the time to discuss your specific needs and find the right plan for you. 3. Failing to properly title and transfer assets. An asset protection structure cannot be effective if you do not title or transfer your assets into the structures you have created. Furthermore, in slightly more complex cases, multiple structures are established and some categories of assets should be placed in one entity while others are placed in a separate entity. Be sure to place your assets into the proper entity and title them correctly. 4. Not respecting the formalities of an entity. A good asset protection plan does little good if the formalities of the specific entities used are not recognized and followed. A judgment creditor will always check to determine whether your limited liability company or family limited partnership is run like a legitimate entity or if the entity – as it has been treated –is a sham. This means that all the work done to create this entity and place certain assets into it was essentially worthless and the protection it was supposed to provide is void. Be aware of the formalities that your entity structure requires. Ensure that they are followed to allow for maximum protection. Plan ahead, find someone who will tailor a plan to your specific needs, be informed about the rules and formalties of the structure you use and ensure that assets are positioned correctly. These small steps are what will distinguish the prepared from the unprepared. The prepared individual will walk into the post-judgment proceeding with confidence that some of their major assets – such as their home and personal bank accounts – will never be touched by the judgment creditor. This article was written by Abby Gartner, Esq., an Associate Attorney for Robertson Law Group, LLC. Abby Gartner may be reached at 312-854-7102 or Abby@RobertsonLawGroup.com. Abby Gartner concentrates her practice in commercial litigation and distressed business planning, corporate law, and asset protection law including Citations to Discover Asset's Proceedings. Robertson Law Group, LLC handles a lot of Citations to Discover Asset's Proceedings due to our expertise in asset protection and liability planning law in downtown Chicago, Illinois. Keywords: Citation to Discover Assets Chicago Attorney, Daley Center Citation to Discover Assets, lawyer Daley Center Citation to Discovery Assets, Abby Gartner Attorney Chicago, Asset Protection Lawyer Cook County, Asset Protection Lawyer Chicago, Circuit Court of Cook County Citation to Discover Assets

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