If a creditor sues you to collect on an unpaid debt and wins, theyll get a court judgment against you. This court order allows them to collect on the debt by seizing your real or personal property (or putting a lien on it), garnishing your wages, or levying your bank account. Personal property includes everything from household goods to vehicles. Real property includes things like your home or land. Though creditors can legally seize real and personal property that isnât covered by an exemption, this isnt common because it can be costly for creditors. Its more common for creditors to use wage garnishment or a bank account levy.
Creditors will eventually file a lawsuit to try to get the money you owe them after not getting paid for a while. If the creditor wins the lawsuit (or you ignore it) theyâll get a judgment. The creditor has the right to seize or take certain property from you to pay the judgment. This is called a judgment. If youâre wondering what kinds of personal property may be at risk, this article is for you.
It can be scary and stressful to be sued, especially if your property is at risk. It is very important for people who are being sued to know what assets could be taken from them to pay a judgment. With this information, you can make smart choices as you go through the legal process.
In this comprehensive guide we’ll cover
- The types of assets most vulnerable in lawsuits
- Exemptions that can protect certain assets
- How the seizure process works
- Steps to take to shield your assets
Overview: Assets at Risk in Lawsuits
Generally, both personal and business assets are potentially at stake in a lawsuit. Personal assets include
- Real estate like homes and land
- Vehicles
- Bank and investment accounts
- Retirement accounts
- Life insurance policies
- Valuables like jewelry, collectibles and artwork
If the business is being sued, things like office supplies, inventory, accounts receivable, and intellectual property could also be taken away.
However, federal and state laws provide exemptions that can protect certain assets in lawsuits. For instance, retirement accounts, Social Security benefits and primary residences have some protection.
How safe your assets are depends on the laws in your state and the specifics of each case. Consulting an attorney knowledgeable about asset protection is key.
Asset Exemptions: What’s Protected in Lawsuits
There is a chance that many assets could be at risk, but federal and state laws protect some assets. Here are some of the most common exemptions:
Homestead Exemption
- Protects equity in a primary residence up to a certain amount determined by state law
- The homestead exemption can range from a few thousand dollars up to unlimited protection
Retirement Accounts
- Most tax-advantaged retirement accounts like 401(k)s and IRAs have protection
- Creditors cannot seize funds in ERISA-qualified plans like 401(k)s
- IRA protection levels depend on state law, but many exempt IRA assets
Life Insurance
- Cash value and death benefits are exempt if policy properly structured with correct beneficiary
Annuities
- Typically exempt if structured as retirement income
Social Security
- Social Security benefits are 100% exempt from creditors by federal law
Personal Property
- State laws enumerate exempt personal goods like clothing, furniture, health aids up to certain values
Wage Garnishment
- Federal and state laws limit the amount that can be garnished from paychecks
Bank Accounts
- Federal benefits like Social Security directly deposited to a bank account are protected
Business Structures
- LLCs, corporations and partnerships can shield personal assets of owners
Statutory Exemptions
- Other exemptions include workers’ comp, disability, child support, etc.
While helpful, exemptions have limits. Consult an attorney to fully utilize available protections.
How Creditors Can Seize Assets If No Exemption
If your assets are not protected by an exemption, creditors use various legal methods to seize them:
Liens
Creditors can obtain court order to place lien on real estate or personal property
Wage Garnishment
Court can order employer to withhold portion of wages to pay creditor
Bank Levies
Funds from bank accounts can be seized outright if no exemption
Seizure of Personal Property
Sheriff can confiscate physical property and sell at auction
Foreclosure
Lenders can foreclose on real estate if no homestead exemption
If you receive notice of any legal motions regarding your assets, be sure to respond appropriately and consult an attorney. Acting quickly is essential to assert exemptions and protect your property.
How to Safeguard Assets Before a Lawsuit
Ideally, implementing asset protection measures proactively is wise to shield your wealth. Some options include:
-
Transferring assets to protected structures like trusts and limited partnerships
-
Converting countable assets to exempt assets like retirement accounts
-
Ensuring real estate and accounts have proper titling
-
Obtaining appropriate insurance policies
-
Maximizing available exemptions like homestead
-
Maintaining separate business entities and finances
-
Structuring estates and inheritances appropriately
Proactive planning with an experienced attorney can effectively shield assets before any legal troubles arise. Timely action is key for optimal asset protection.
Lawsuits put many valuable assets at potential risk of seizure, such as real estate, vehicles, bank accounts, retirement funds and personal property. Exemptions can protect certain protected asset classes, but have limits. Understanding exactly how creditors can legally pursue assets allows you to take informed steps to shield your wealth if faced with a lawsuit. With proper planning, exemptions and legal structures, you can identify and secure your most important assets.
What’s the Process for Seizing Non-Exempt Personal Property?
If you have non-exempt property that a judgment creditor wants to seize, a court-appointed officer or sheriff will serve you with a writ of execution. Once thatâs done, the sheriff or officer will peacefully remove the property. The exact procedure, including what goes into a writ of execution, is determined by state law.Â
Once seized, the property is sold to the highest bidder at an auction. The sale proceeds from the auction are then used to first pay for the cost of taking the property and holding the auction sale, then to pay down the amount owed on the money judgment.Â
What Is a Judgment Creditor?
A judgment creditor is someone you owe money to that sued you for nonpayment and won a court judgment against you. At this point, youâre called a judgment debtor. The court order may also be called a money judgment.
A debt collection lawsuit starts when youâre served with a summons and complaint. The summons tells you how long you have to respond, and the complaint outlines the reason for the lawsuit.Â
The amount of time you have to answer the summons is determined by the law in the state where the lawsuit is filed. Itâs important not to lose track of that. If you donât file an answer, the court will eventually enter a default judgment against you.
If youâve been sued for a debt, donât ignore it. Responding to the lawsuit in time can help you avoid a default judgment â and protect your income and property. Solos tool walks you through how to file an answer and guides you through the process. Thereâs a small fee to use the tool, but it comes with a money-back guarantee if your document is rejected by the court.
What assets can be seized in a lawsuit?
FAQ
What assets can be taken in a lawsuit?
Assets that can be taken in a lawsuit generally depend on the specific laws and regulations governing the jurisdiction in which the case is being tried. Bank accounts, real estate, and personal property like cars, jewelry, and business equipment are all common things that can be seized.
What types of property can be seized in a lawsuit?
Homes, land, and in some cases, personal property like furniture and electronics can be vulnerable, depending on the jurisdiction and specific laws. Bank and savings accounts, such as checking and savings, can also be seized in a lawsuit. Most of the time, the creditors can seize or demand money from these accounts to pay off the debt.
What can be seized during debt collection and civil lawsuits?
Here is what can be seized, and what can be protected, during debt collection and civil lawsuits. There are a lot of things that a creditor can take from you if they sue you and win. They can garnish your wages, levy your bank account, and even go after your personal property.
What assets are at risk if a lawsuit is filed?
Personal assets like bank accounts, real estate, and vehicles may be at risk, although certain assets like retirement accounts and homestead properties often receive some protection. Business assets, like physical property, equipment, and financial accounts, may also be at risk if the lawsuit is successful.
What happens if a creditor files a lawsuit?
If a creditor files a lawsuit against you and wins a judgment, they can seize quite a few assets. They can garnish your wages, levy your bank account, and even go after your personal property. This includes everything from cars and furniture to clothing and household goods. What personal assets are protected in a lawsuit?
What assets are subject to seizure?
Common assets that are subject to seizure include bank accounts, real estate, and personal property such as vehicles, jewelry, or business equipment. However, protections and exemptions are often in place to safeguard certain assets, depending on factors such as the type of debt or the jurisdiction.
What assets are not protected in a lawsuit?
Assets That Are Not Protected
Stocks, bonds, and brokerage investment accounts. Cash, Certificates of Deposit (CDs), checking accounts, savings accounts, money market accounts. Monies owed to you (such as notes receivable or mortgages receivable).
What assets can you lose in a lawsuit?
If you are personally named in a lawsuit, all assets held in your name or in joint ownership can be seized to satisfy the judgment. If your business is sued, all assets held by the business can be seized to satisfy the judgment.
What assets can the court take?
The court can take many assets, such as cash, real estate, stocks, mutual funds, annuities, and retirement accounts.
What assets can a debt collector take?
Debt collectors can only take money from your paycheck, bank account, or benefits—which is called garnishment—if they have already sued you and a court entered a judgment against you for the amount of money you owe. The law sets certain limits on how much debt collectors can garnish your wages and bank accounts.