Asset Protection Asset Protection

Protecting Your Assets

Bank Out of State

The easiest thing for a judgment creditor (a creditor that has a judgment against you) to do is go after money in your bank account. After receiving a judgment against you, they will petition the court to garnish your bank account and then ask the bank to send a writ of garnishment to whatever bank they think you bank at.

Notice, I said where they think you bank. Unless you told them where you bank (and if you have already read the Debt Relief section, you will know that is a big no-no) they are going to have to make some educated guesses.

First, they are probably going to try to determine where your last payments to their account came from. Creditors must have figured out by now that it makes sense to keep copies of checks just for this purpose (if not, I hope there aren't any creditors reading this!). Ask yourself, are you still banking at the same bank you were with before you went into default? Nine times out of ten, the answer will be "yes."

Most collectors are not going to have your banking information, so they take a shotgun approach. They look up the major banks in your area and have the court send a writ of garnishment to them all. Again, chances are you bank with one of them (well, do you?).

My point is that they have to find your account before they can access your funds. Your funds will actually be frozen for 30 days or so because you can ask the court for an exemption hearing in case your income, for example, is exempt from collection. Of course, no one is going to tell you this, least of all the judgment creditor. You won't know what has happened until you start bouncing checks and call your bank.

If this were to happen to you, the judgment creditor would be in a great negotiation position. They know you have to pay your bills, and the amount of money in your account is likely much less than you owe, so they agree to unfreeze your funds if you agree to some sort of payment plan.

You do not want to be in that position, especially when it is so easy to avoid.

Judgments are only good in the state where they are issued. So, if you bank out of state, any writ of garnishment from your state is unenforceable. Theoretically speaking, the judgment creditor could domesticate the judgment to the state that your out-of-state account is in, but they would have to find it first, and that would require a very large shotgun!

Furthermore, to domesticate a judgment to another state costs time and money, and unless the amount you owe is Significant (with a capital "S"), it is probably a waste of the judgment creditor's time.

Rather than driving across your state line, just hop onto your computer and set up an account online with a company like eTrade, Fidelity, or INGDirect. Don't close your local accounts, just keep the majority of your cash in the out-of-state account in case a creditor finds your local account.

Think of your local account as the possum, the decoy. Let them find it, take the little money they might find there, and then, hopefully, go away.

If you've stopped making payments and are putting that money aside to use when negotiating a settlement with creditors at a later date, it is particularly important to put those funds in an out-of-state account.

Setting up an out-of-state account is easy to do and a very effective asset protection strategy. Do it now.

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