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Richard
Richard, Attorney
Category: Legal
Satisfied Customers: 44442
Experience:  Attorney with 29 years of experience.
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My S corp has a judgment against it and my business account

Customer Question

My S corp has a judgment against it and my business account has been garnished. Since my wife doesn't work and we have 3 kids can they still take the money in the account. We live in Florida.
Submitted: 1 year ago.
Category: Legal
Expert:  Richard replied 1 year ago.

Welcome! My goal is to do my very best to understand your situation and to provide a full and complete answer for you.

Good afternoon. Your S Corp is considered a separate and distinct entity than your personal account. Although your personal assets and your personal account would not be at risk for a judgment against your corporation, if the corporation has a judgment against you, the judgment creditor would have the right to attach your corporate bank account. To avoid this, you might want to form a new corporation and do business going forward through the new corporation so you have access to your income going forward.



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Customer: replied 1 year ago.

I thought that since the profits from an S corp are considered income they would be protected. I understand that if i have a judgement against me personally those funds would could be protected since i am the only income earner in the house. Since my pay comes out of my S corp isnt that the same thing?

Expert:  Richard replied 1 year ago.

Unfortunately, the assets of the corporation would not be protected. The S Corp is considered its own entity and its assets, including bank accounts, are at risk to a judgment creditor. This is the part of my job I don't
like...when the law is not in favor of my customer. But, I can only provide you
information based on the law so that you can act on the best available
information to you. ...........I wish I had better news, but can only hope you
recognize and understand my predicament and don't shoot the messenger. I'm
sorry!

Customer: replied 1 year ago.

Thank you for an honest answer.


If i start another S corp under a new name with a different tax # XXXXX the same thing, will they be able to get that money.

Expert:  Richard replied 1 year ago.
Yes....you can do exactly that. You're welcome...it's my pleasure to help!
Richard, Attorney
Category: Legal
Satisfied Customers: 44442
Experience: Attorney with 29 years of experience.
Richard and other Legal Specialists are ready to help you
Expert:  Richard replied 1 year ago.


Thank you so much for the positive rating! I appreciate having had the opportunity to serve
you! If I can be of assistance to you in
the future, just look me up and I will be happy to help!

Customer: replied 1 year ago.

what can i do to protect myself if i signed a personal gurantee. it would seem that starting another company would not make a difference. Or would it?

Expert:  Richard replied 1 year ago.

Hi there. If you signed a personal guarantee, then you do have personal liability. But, there are some steps you can take. One, obviously you could file for bankruptcy protection which would allow you a fresh start and get these debts discharged. But, depending upon your asset base, this may not be appropriate for you. Two, although you can't transfer assets for less than fair market value because this would run afoul of the Uniform Fraudulent Transfer Act as an attempt to avoid creditors, what someone in your position might want to consider is putting your non-exempt assets (retirement
income and retirement account assets are exempt and can be left in place) into a
family limited partnership. Carefully drafted, this converts assets that a
creditor would find attractive to go after into a limited partnership interest
with no control, no rights other than that of an assignment, no
transferability, no marketability, and no right to distributions. The transfer
is for fair market value...i.e., you are simply exchanging one asset for another
of equal value to you. And, you maintain
control through a general partnership interest that you control. Yet,
when complete it essentially is an asset no one wants and thus the creditor is
less likely to pursue the debtor. Family
limited partnerships must be carefully drafted and one would need an attorney
experience in this area to do so, but they can be a very effective method of
asset protection.

Richard, Attorney
Category: Legal
Satisfied Customers: 44442
Experience: Attorney with 29 years of experience.
Richard and other Legal Specialists are ready to help you
Customer: replied 1 year ago.

i dont have any monetary assets. My house and car are upside down. My wife's name is XXXXX XXXXX anything. I don't know if they can come take household things like furniture and if it would even be worth it. I have some tools which i don't have any idea what they are worth, and a couple of work trailers each worth less than $3000. I thought that they would be able to come after the bank account of the new company if i signed a personal guarantee. would it be best to put the new company if my wife's name.

Expert:  Richard replied 1 year ago.

In this case, form the new company in your wife's name, and file bankruptcy for yourself. This will get these debts discharged and let you get a fresh start going forward. The items you mentioned are going to exempt and beyond the reach of the creditors.

Customer: replied 1 year ago.

we are holding off on bankruptcy till foreclosure since we will lose the house. My wife has some debts and was going to file bankruptcy as well. I want to make sure i am not wasting my time and money starting a new company if that account can be garnished.

Expert:  Richard replied 1 year ago.

I would suggest you file for bankruptcy now and include your home mortgage....that will eliminate your personal liability for the mortgage and then give you better leverage to deal with the bank on keeping your home. Once your personal liability for any deficiency is discharged, then the bank is motivated to deal with you rather than anyone else because if they make a deal with you, then don't have the costs of foreclosure or the risk of ownership and subsequent closing costs after they take ownership in foreclosure.

Expert:  Richard replied 1 year ago.
Thank you again for the positive rating! I appreciate that very much!
Customer: replied 1 year ago.

regardless whose name the new company is in can those funds be garnished for the new company from any personal creditors my wife or i have if we don't file bankruptcy? Some of the creditors have placed a lien on my house. will those go away if file bankruptcy and refinance to keep the house?

Expert:  Richard replied 1 year ago.

You have an unlimited homestead exemption in Florida so they can't do anything with your house. And, as long as your wife forms the new corp, if she is not a guarantor on any of the debt, then they will not have the right to go after your new corporation. But, you want to make sure she owns the shares as her sole and separate property. To insure that, whatever money she needs to put into the company to form it, do a Partition Agreement whereby you divide marital assets in half to allow her the funds as her sole and separate property to contribute for the ownership in this new entity.

Customer: replied 1 year ago.

is the partition agreement something that has to be filed with the clerk or do we just make it up and file it away? she has the money needed to start the new corp. i would not have to give her anything. Her name is XXX XX the house and she is a stay at home mom so she doesn't have any income so the house would probably have to go in my name. My mother and father in law have offered to buy us a house and we pay them rent until we can get all this behind us and my business gets to a steady point. Do you think this is a better option than refinancing so we dont have anything in our name and we don't have to try and get a loan with bad credit? Would it be better if they formed a trust and put the house in the trust?

Expert:  Richard replied 1 year ago.
It does not; just both sign it and keep it in your files. If the house is going to be your principal residence, the creditors can't touch it due to the Florida unlimited homestead exemption. So, you need not put it in a trust.
Customer: replied 1 year ago.

if my mother and father in law own the house should they put it in a trust?

Expert:  Richard replied 1 year ago.

They do not need to, but if they are not going to put it in your name, it would be helpful to do so just in case they were to die and have not addressed it in their will. If they do put it in a trust for your benefit, they need to make sure it's a spendthrift trust so it's beyond the reach of creditors.

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