Lawsuits seem to be becoming one of the United States’ new favorite pastimes. In fact, it is statistically reported that you can win a million-dollar lawsuit easier than winning the lottery. Indeed, the number of lawsuits in the United States of America has been rising and will continue to rise. Therefore, it is vital for you to know more about lawsuits so you can take all the preventative measures before you are sued.
One of the most common questions being asked about lawsuits is that can you be sued for more than what your net worth is. The answer simply is yes. You can be sued for more than your net worth. Though, there are ways you can avoid this and deal properly with this to ensure minimum financial damage.
What Happens If You’re Sued for More Than Your Net Worth?
Being sued is definitely a scary experience. It can seriously exhaust you by consuming a lot of time and can be a source of financial worry for you. Although suing a person for more than their net worth is not a wise decision at all, a lot of people still sue a person who has little to no assets.
In such cases, if you are sued for more than your net worth, you are usually investigated to determine whether or not you are able to pay the sum of money. Most commonly, if you do not have the assets or the money to pay, you are ‘judgment proof’.
You can also erase the debt from a lawsuit if you declare bankruptcy. Fortunately, it is much easier to erase this debt from a lawsuit than to erase a student loan or a tax debt.
In addition to that, if you are knowingly being sued for more than your net worth and the person suing you know that you are not able to pay due to a lack of assets, the chances of settling for a lower amount increase. Thus, you can decrease the amount to one that is within your financial constraints.
Different Approaches to Settlement Recovery
If you are being sued for more than your net worth, but you still own any real estate, any bank accounts, or are employed, the other party will most likely take an approach of recovery of the judgment.
1) Employment
If you lack the money and assets to pay the amount but are employed, the opposing party will take a part of your wage monthly in what is known as wage garnishment. Unless your income is too low such that it equals minimum wage, the opposing attorney can take up to 25% of your wage so that they could recoup what they are owed. The opposing attorney can not take part of your wage also if your income is a disability or a social security income.
2) Real Estate
The approach to settlement recovery via real estate depends on various states. Some states have laws that protect your home or property from such opposing parties. However, other states allow opposing parties to take up a part of the real estate you own or the whole of it.
3) Bank Accounts
Bank accounts are usually the first place where the opposing attorneys look for money. Although your retirement accounts are protected, your investment or saving accounts can be targeted by the opposing party. Thus, you will have to pay from your saving or investment account.
Asset Protection
One way to safeguard yourself from lawsuits that drain your wealth is to set up asset protection by a qualified attorney. This will save you from any future lawsuits and litigation judgments. You will also have complete control of all your money and will enjoy your assets without any worry.
However, most people set up asset protection only after they have been sued. The best asset protection is set up before any lawsuit or even a threat of it.
Transferring All the Assets to Spouse or Children
During a lawsuit, transferring all your assets or money to your spouse or children will not save you from paying the amount. The court can simply use the doctrine of a ‘Constructive Trust’ to lift the veil and consider your family members as those holding the assets for you.
It also creates a dozen of complications for which you will need a professional attorney to handle your assets. Apart from that, transferring your assets to your spouse may create difficulties in Estate Planning or in the case of asset division, such as divorce.
Conclusion
Lawsuits can make you feel totally helpless. What is more frustrating is having to pay an amount that you do not have the capability of. Though, there are always things you can do to either minimize the damages or avoid them altogether. First of all, you need to be informed about such things and be sure to be safeguarded against them. This article offered you just that and I hope it helped you. Leave down and comment and let me know what you think about lawsuits.