asset protection advice

[joskimad]

in a nut shell. I have a home close to foreclosure in new jersey.
i moved to florida,bought a home and now live and work there.In florida as head of household they cant garnish my wages or levy my bank account. I will probably have a 75000 short fall with the foreclosure in new jersey and im concerned about a judgement.I have a friend who took his name off his bank account and left it only in his wifes name. he then created an llc in his wifes name and put all his monies in that account. he pays his normal bills through his wifes checking account and leaves a limited amount of money there. does anybody have any experience on this kind of asset protection? thanks in advance.

[lrprn]

I have a friend who took his name off his bank account and left it only in his wifes name. he then created an llc in his wifes name and put all his monies in that account. he pays his normal bills through his wifes checking account and leaves a limited amount of money there. does anybody have any experience on this kind of asset protection? thanks in advance.

If you aren't filing bankruptcy, then it's somewhat underhanded but I don't believe it's illegal. If this kind of financial trick is done to avoid judgments and garnishments it will last only so long before the creditor figures out what's going on and hauls you back into court.

If you are filing bankruptcy alone without the spouse and do this, then it's an insider preference asset transfer and it can get you into very hot water when the trustee figures it out by looking at your tax forms that show income that isn't visible in any accounts.

The bankruptcy court takes hiding cash assets by giving them to a relative or close business associate within a year before filing very seriously - that's bankruptcy fraud. You don't want to go there.

[HHM]

The problem is, if you do this AFTER a judgment has been entered, the creditor can pierce the corp. veil to get at the LLC funds.

There is nothing inherently wrong with what you are doing, but it is somewhat costly and a PIA to maintain the arrangement. (you have to pay registration fees each year, you have to file a tax return on behalf of the LLC each year, etc).

I think you would going to a lot of trouble over a "minor" risk. Deficiency judgments are "rarely" pursued. What is more likely to happen is that the bank will foreclose, write-off AND forgive the debt, and issue you a 1099-c (which could give rise to income tax liability for the deficiency amount, see IRS form 982 and the associated publication).

Creating personal LLC's and those sorts of advanced asset protection schemes are really a tool for individuals in business with a high risk of litigation (i.e. Doctors, Architects, etc).