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  1. #1
    Join Date
    Jun 2013
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    5

    Default Weird Question About Protecting Assets from Potential Judgment

    My question involves collection proceedings in the State of: CA

    Another "what-if" question...

    Suppose a party wins a judgment against me for more than I'm worth, and it's non-dischargable in bankruptcy.

    I Have $15K in my checking account (that I never really use and is just there for emergencies) and a car worth $5K, that's it.

    How much do I lose if this were to happen?

    From my understanding of CA judgment exemptions (http://www.courts.ca.gov/documents/ej156.pdf), they can take all the money in my checking account except the last $1350.

    Where can I put the money to make it exempt?

    I was thinking of purchasing ~$7500 in jewelery (exemption amount) and/or putting 80% of my checking account into an ERISA-qualified retirement account (but can I even purchase this type of retirement account being self-employed?)

  2. #2
    Join Date
    Mar 2013
    Posts
    18,340

    Default Re: Weird Question About Protecting Assets from Potential Judgment

    For illustration purposes let's say the creditor already won the judgment.

    Generally, anything you do to thwart a judgment creditor can theoretically either be reversed by a judge or ignored by a judge.

    So, even if you successfully put the money into something exempt the judge can either compel you get it back or compel you to pay or face contempt of court charges.

    From a practical standpoint, it's likely that your bank account (and/or wages) would get hit rather quickly so, hypothetically, if the judgment was issued today you'd have the length of the appeal period before the bank account or your wages could be affected.

    Whether you put the money into something exempt or not, it's still a good idea to get it out of the bank and not do business with banks anymore.

    Once you do that it could be months before a creditor could haul you in for a debtor's examination where you would have to reveal, under oath, your assets and the location of the assets.

    You mention ERISA accounts. You can contribute $5500 to a regular IRA or Roth IRA even if you are self employed and you can also contribute to a SEP. You can find out all about that on the IRS's website. The disadvantage of a regular IRA is that you can't take the money out without taxes and penalties. The advantage of a Roth IRA is that you can take the principal out without penalty if you need it in the future.

    The jewelry, heirlooms and art exemption is $7175 according to the following site:

    http://www.thebankruptcysite.org/exe...alifornia.html

    Unless you are buying somebody's second hand jewelry or buying it for keeps you will almost never be able to sell it for anywhere near what you paid for it.

    Bottom line, whatever you do to thwart a judgment creditor has an element of risk to it.

  3. #3
    Join Date
    Jun 2013
    Posts
    5

    Default Re: Weird Question About Protecting Assets from Potential Judgment

    I will look more into retirement accounts and their exemption status. From what I've read so far though Roth IRAs are non-ERISA qualified, and a judge can rule them fair game for creditors if one is under 65 and work-able (http://www.nolo.com/legal-encycloped...-accounts.html).


    What about opening a Delaware bank account and depositing money in it? I read a law article about the beauty queen who was ordered to pay $5 million for defamation (http://www.drescherlaw.com/blog/beau...bankruptcy.cfm). In the article, it says "bank account seizures are prohibited in Delaware."

    Anyways, I'm not involved in any legal situation. I'm asking this for educational purposes.

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