If you are facing foreclosure by defaulting on four consecutive payments, be rest assured that your creditors will attempt to recover the balance by forcing the sale of assets you had used as collateral for the loan. Of course, you just can’t let it happen. Simply wishing it away is not going to solve this problem, you have to take concrete steps to protect your assets.
To gain access to your assets, your creditors may obtain a deficiency judgment or place liens on your property. However, there are several steps you can take to protect your personal assets and prevent them from being seized in a foreclosure.
Of course, it may not be possible for you to tackle the legal intricacies involved in protecting your assets as a result of foreclosure. Your best option would be to hire a foreclosure attorney.
This will not only help you in avoiding the abusive practices of property preservation companies but will also get you compensation in case such companies damage your assets. You also get practical advice from the foreclosure attorney on ways to protect your assets.
Why protecting assets is important?
Once a foreclosure comes into effect, your creditors are likely to employ the services of property preservation companies, also known as foreclosure clean-up companies. Although engaged to ensure that the foreclosed property is secure and properly maintained once vacated, these companies are known to break into still-occupied homes, steal personal property and illegally lock people out of homes that are not foreclosed.
Your creditors are able to contract such companies and send them to your home is because the mortgage contract signed at the time of taking the loan, gives them this right. Legally, and on behest of the creditors, these property preservation companies are supposed to winterize the foreclosed home, remove trash from it, make necessary repairs and change locks. They can only do this, once you vacate your home and not while you still occupy it.
How to protect your assets?
In protecting your assets, time is of the essence. A quick action taken preferably before the foreclosure process can help you in protecting some of your assets. On the other hand, if you don’t take the legal steps to protect your assets, it may be deemed an attempt to conceal assets from creditors. In law, this is termed fraudulent transfer, which is unlawful.
Fraudulent transfer includes transferring assets well below the market value with the intention of deceiving the creditors. Even if the assets are disposed of unintentionally, leaving nothing for creditors to realize their loan from, it will be counted towards fraudulent transfer.
Steps to protect your assets
The following steps will help in protecting your assets before or during a foreclosure:
- Protect your assets with a trust fund: This is a practical approach that will help you save your assets. Find and create a trust fund that will make your beneficiaries, such as your children or grandchildren, owner of the assets. This will protect these assets from your creditors. Although time consuming and expensive, this is the best option to protect your assets, as compared to others.
- Put money into exempt accounts: Your retirement accounts are exempted by federal and state laws from creditors garnishment, with a few exceptions. Although this provision varies among states, it is always prudent to increase the amount that you put into your retirement accounts. This option is better than purchasing a second home or a car.
- Go in for new exempt investments: Instead of investing in non-exempt assets, it will be immensely helpful to go for exempt investments. For example, you can protect your assets by investing in an IRA or a 401k. This will also help you in planning for the future.
- Opt for opening an account outside the country: If you comply with the provisions of the US Patriot Act regarding transferring money out of the country, opening an off-shore account will certainly save all your investment in such accounts.
- Establish a Limited Liability Company (LLC): If you are able to invest in a new business before foreclosure, you can very well put all your assets into the company’s name and protect them from creditors. However, this LLC should not be a sole proprietorship or a partnership.
