In the event of a foreclosure, it is imperative that you protect your assets. There are several steps you can take to shield your personal assets from being seized in a foreclosure. If the debt is not fully satisfied, a deficiency judgment may be obtained by the creditor, and liens may be placed on other property.
It is important to know the laws regarding foreclosure in your state. The sooner you take action, preferably before the foreclosure process, the more likely it is that at least some of your assets will be protected.
Failure to take the legal steps in protecting your assets may be deemed unlawful, and as an attempt to conceal assets from creditors, known as fraudulent transfer. Examples of a fraudulent conveyance include:
- The transfer was well below market value
- It is performed with the intention of deceiving creditors
- There is no intent, yet it is after the debtor is insolvent, leaving them with little left over
Below are a few steps you may want to consider in order to protect your assets before and during a foreclosure:
- Create a Trust Fund: Some trust funds will protect your assets for your beneficiaries, such as your children and grandchildren. Though setting up a trust fund can be time consuming and expensive, it may offer you more protection than other protective actions.
- Increase Your Assets in Exempt Accounts: States vary in terms of what is and what is not exempt, so speak with your attorney for guidance. Rather than purchasing a second home or something like a collectible car, you could increase the amount you put into your retirement accounts and other exempt investments.
- Create New Exempt Investments: For those who have not invested in exempt accounts or have invested in non-exempt assets, it is a good idea to start. Putting money into an IRA or a 401k can not only protect your assets now, but doing so also plans for your future.
- Open an Off-Shore Account: If you consider this option, be sure that you are in compliance with rules set forth in the U.S. Patriot Act regarding money being transferred out of the country
- Start a Limited Liability Company (LLC): It may sound counterintuitive, but investing in a new business before foreclosure can help protect your assets by putting them into the company’s name—so long as it is not a sole proprietorship or a partnership. This option does not suit everyone, but it is an option to discuss with your lawyer.
If you are hoping to protect your assets during a foreclosure, the type of legal help you might need varies on the method you want to use. If you want to create a trust fund, it’s best to contact an real estate lawyer. But for the other options listed above, you typically do not need help from an attorney.
If you are looking to form an LLC, you can find the necessary forms online and pay the filing fees. While a business lawyer may be able to help you make sure the LLC is properly formed, it is typically not necessary.