In the event you’re unable to come to an agreement with a creditor to settle a debt, you may find yourself in court and it might be too late Protecting Your Assets from Creditors – so read on to learn more.
Should that creditor win a judgment against you, the court can grant them the right to come after your personal assets.
This could mean the loss of your home, your car, your wages and money in your checking and savings accounts.
Taking certain steps toward protecting your assets from creditors, before problems arise, could spare you this pain.
The key is to take the following steps before you run into problems. The farther out in front of the judgment you can get, the safer your assets will be.
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Domestic Asset Protection Trusts
The states of Alaska, Delaware, Rhode Island, Nevada, South Dakota and 12 others permit you to place a portion of your assets into irrevocable asset protection trusts (APTs) to shield them from creditors.
Remarkably, you needn’t be a resident of those states to get into them.
Cash, stock, LLCs, business property and real estate are among the assets you can place into these trusts.
Designed specifically to defend assets against claims by creditors, the chief purpose of APTs is to ensure your descendants inherit your assets when you die.
Bear in mind however, once created, these trusts cannot be changed nor revoked. One more thing, APTs will not shield your holdings against child support claims, alimony claims or taxes.
Limited Liability Companies
Housing the assets of your business, a LLC protects your personal assets from creditors related to your business dealings.
This way, your home, car or bank accounts are defended if your business incurs debts it cannot cover. You can learn more about the dangers to your bank accounts at Freedom Debt Relief’s overview of savings account vulnerability.
IRAs and 401(k)s
In most cases, retirement plans are judgment-proof. The exceptions are back child support, alimony and tax payments.
Homestead Exemptions
Much of the primary value of your principal residence is protected from creditors in certain states.
While some allow an infinite exemption, others, such as Massachusetts for example, limit it to $300,000.
Debt Settlement or Negotiation
One of the best methods of protecting your assets from creditors is to ensure they not endangered in the first place.
By and large, the only time you’ll get to the point at which a creditor seeks a judgment against you in court is when you’ve ignored all of their attempts to contact you to work something out.
Once you’ve done your due diligence and determined the debt is indeed a valid one, your best course of action is to try to reach some sort of an agreement with the creditor to satisfy the debt. Best of all, this could be for less money than you think.
Third party debt collectors are the ones most likely to take you to court to try to win a judgment for an unpaid debt.
They are also in the best position to negotiate a settlement for less than is owed.
And they have usually purchased your debt from the primary creditor for pennies on the dollar, which gives them the ability to accept a fraction of the outstanding amount and still make a profit.
This is one of the reasons it doesn’t pay to ignore debt collector’s calls.
Answer the phone—see what they have to say.
Take the appropriate steps to ensure the debt in question is indeed an obligation you incurred.
Try to work something out if it is.
Doing so will be cheaper, less harmful to your credit history and easier on your nerves in the long run.
