Judgment Proofing

Definition of Judgment Proofing – This term refers to the process whereby a person keeps their assets immune from civil judgments of any sort whether from a family court, civil court or other civil action. By immune we mean that there is no way for the judgment to be collected against. There are no identifiable or attachable assets to garnish, lien, liquidate, auction, seize, grab, confiscate etc.

Effectiveness of Judgment Proofing – The key is to have your assets removed from the jurisdiction of the litigation, judgment, lien etc. This removes the assets from regular legal collection procedures. Now whoever it is chasing you, must now chase you to a foreign country. This means hiring a law firm in the foreign country. Think expensive, forget contingency. The next ingredient is to use an anonymous bearer share company. Such a company will have no ownership records listed in any public registry or database. Even if the creditor was to find the corporation bank account how could they establish it is you without any ownership records for the corporation? They can’t unless you tell them. One also must be careful of telltale trails from the home country bank account to the bank account in the foreign country. This may show them where the money went when it left the country, but they still are lacking the ownership records of the corporation. The bank records are covered by bank secrecy so they are not going to be able to get the bank records. Just wiring money out of the home country bank account is not conclusive that you have control over the money in the foreign bank account. If the money leaves your home country bank account and goes to an attorney client trust account it is even more difficult for the collection attorney to ascertain what was going on especially when you start answering “attorney client privilege” when asked why the money was sent to the attorney client trust account.

Fraudulent Conveyance – This is a term that means you took monies or assets out of the reach of a creditor to avoid them getting these assets to satisfy a judgment. This could affect you if you move assets to an offshore corporation or foundation after a judgment has been awarded against you. Someone could come to say Guatemala and argue that you fraudulently conveyed money to a Guatemala or Ecuador corporation to avoid them getting it. This is not an automatic event, very far from it actually. They must go to court and file arguments to support this allegation. In the countries we operate in such a case would have an extremely low chance of success. It would be costly for the other side and the money could simply be relocated to another jurisdiction when the case starts. A fraudulent conveyance case requires proving the intent was to move the money or assets out of the reach of the creditor. If the money was moved because of investment, retirement, relocating etc this muddies the water a lot and makes it hard to prove intent. Some people like doctors, contractors, etc are in lawsuits every day of their life. It is not reasonable to argue that anytime they invest money offshore or buy real estate offshore they are involved in a fraudulent conveyance. There is a chance of a fraudulent conveyance action but it would be minimal and the chances of losing such an action even smaller if we set it up. These actions are expensive, and time consuming taking years to go to trial and not easy to win for the person bringing the fraudulent conveyance lawsuit.

Repatriation of Funds Order – We will discuss this concept further since this is where a lot of shabby asset protection structures fall apart. This is what the collection attorney will resort to if he knows you have money in an offshore bank account. First, how will he know this is a good question? Let’s say you tell him in a deposition, or in interrogatories. Then he goes to the court that issued the judgment and asks for a hearing with you in front of the judge. The judge goes over these facts about the offshore bank accounts with you and then he “may” order you to bring the funds back into the jurisdiction of the court so they can be attached or seized. Many judges will not do this so easily which is good. This is of course not what you want, so steps must be taken to prevent against repatriation. We do not mean lying. The concept is called plausible deniability. There has to be a reason you can present to the court as to why you cannot repatriate the funds. This can be because the funds were held under an International Trust Agreement, which has a distress clause. This clause removes the control of the funds from you during a period of duress or distress such as lawsuits, arrest, divorce etc. The agreement specifies what is to be done with the funds during this period of distress. There are provisions for regaining control just by documenting the end of the distress. Remember that if you and the assets are out of the jurisdiction of the court in question, then there is not going to be any depositions, orders of examination, interrogatories served on you etc. So if you and the assets are out of the jurisdiction, the opposing counsel is out of tactics for the most part. If they try to chase you they will think you will change jurisdictions again when you know they are in pursuit and this would not be productive and a waste of the clients money. This is the perfect settlement climate for you. Offer the other side a small settlement or tell them they can hang the judgment up on their wall and look at it every day. Say things like a one time offer expiring in five days. Use a law firm in a country other than where you are to negotiate for you so they do not even know where you are. When you settle you want the lawsuit dismissed with prejudice so it cannot be filed again and the judgment vacated, which means it is like it never happened. This requires the signature of the judge to get these filings so it is a well-protected settlement. Also have an agreement that calls for both parties fully releasing each other from these incidents in question and against any damages realized or not yet realized. Do not go back to the country of jurisdiction to sign these papers ever. Have them notarized and apostilled or certified by the nearest embassy of your country where you are or better yet in a nearby country so as to not reveal your true location. There is little they can do but in some countries they may be able to have an embassy official from the country of the lawsuit serve you with papers from the home country court. This is getting way out there but possible in some cases, depends on the countries involved. Even if they served you abroad the implications would be minimal. The time delay for this can be months as well. So if they do not know where you and your money are, that ends all hope for them and that is where you want them for a settlement.

A Look at Collection Attorneys – In most countries the graduates of the most prestigious law schools who graduated at the top of the class do not wind up practicing collection law. We are trying to be nice. This type of work appeals to someone who likes being a bully and pushing people around who often are too broke to fight back. These lawyers like to take advantage of people ignorant of the system. In the trade it is fairly commonly perceived that these lawyers are the ones who cannot make it practicing real law. They like to get paid by the hour or case but often have to resort to contingency work in countries where it is allowed. The USA is one of a handful of countries in the world that allows lawyers to work on contingency. The other countries realize what a mess the court system becomes when you allow contingency legal practices. The collection lawyer follows patterns of behavior that when studied show their vulnerabilities. Remember it is a business to them and they need to make money and be cost effective for their clients. Going offshore makes things very confusing for these collection attorneys. The collection process becomes very time consuming and very expensive. The subpoena and seizure power of the local courts becomes pretty worthless. If the debt and the assets are not substantial (at least $500,000) it is rare to see any offshore collection efforts and most of the time the amounts sought offshore are in the multiple millions of dollars. Offshore asset protection can often position one to settle these collection cases very cost effectively. Remember when a court case is lost negotiations really begin, if you have good legal representation. If you are protected with an offshore structure you are in a position to negotiate hard. Most lawyers overlook this aspect of offshore asset protection but it is a very real and effective strategy. This can turn the collection attorney your adversary hired over to persuading his client to take any settlement. He will not want an offshore case. He will probably not understand the parameters of the offshore law. He will have to retain lawyers in other countries at exaggerated prices. His client will become unhappy fast with the amount of money being burned up. If there is no recovery the client is likely to file a lawsuit against the collection attorney for wasting their time and money, excessive billing, incompetence, etc. Then after the lawsuit is filed the collection lawyer is asked how many offshore collection cases he was successful at. He will probably fall apart right there. The vast majority of clients would not know enough to ask the collection lawyer how many successful offshore recoveries he handled and how much the expenses were compared to the recovery. In some large offshore fraud cases the victims collectively will spend $12,000,000 and wind up recovering $10,000,000. You are taking the collection attorney into a world where he is probably ignorant, insecure, and afraid of making errors. Negotiating for 1/10 of the debt or even less is always a wise course of action.

Collection Agency Practices – The collection attorney operates with clients coming to them with a judgment. Sometimes the law firm who handled the case plays collection attorney if it is a simple matter with the judgment being against a well-heeled individual or a good-sized business with assets. Many times the lawyer refers the client to a collection attorney or a law firm that specializes in collections. The collection law firm then arranges payment terms with the judgment holder and begins the work. First they search public databases to find assets. The gold for them is a publicly registered asset of value such as land, a home, income producing property, a boat, a car, an airplane, or a motorcycle. The collection lawyer can easily determine if such things are encumbered (have a loan against them) and have ways of determining if there is equity in excess of the loan. Often these methods employed by them are illegal. If the collection attorney sees there is an asset available that has equity, he will begin to use the court process to encumber or lien the asset to see if this forces a settlement voluntarily from the debtor. If the debtor does nothing, the collection attorney may begin court proceedings, which generally allow for the court to sell the asset in some impartial way using the proceeds to pay off any pre-existing loan and then in turn pay the judgment holder if there is any money left over. Remember the party trying to collect against you has costs for the auction collection process and they can be thousands of dollars. If the asset does not sell for enough to pay off the encumbrances then the auction failed and you still have your property. The lien holders have to be paid off in full before the person collecting can have your asset. If there is only enough equity to partially pay off the judgment after any liens, negotiations may prove successful. If there is enough money to pay off all of the judgment then negotiations will prove futile in terms of reducing the debt by a significant amount. Bear in mind that if the asset does not bring in enough money at a sale or auction the judgment holder has lost a lot of money on legal fees and court costs. If the asset does not sell for enough to pay off the pre-existing loans then the sale is negated and nothing happens so the judgment holder again wasted their time and money in legal fees. This of course causes some to encumber real estate so as to make the property negative in terms of equity. Some call this equity stripping.

Equity Stripping – This term means the equity in the property, car, boat, plane, motorcycle, business etc. is removed by placing loans on the assets to such an extent that if the asset or property we could say, was forced to sell at auction it would never sell for enough to pay off the existing loans. Some use Guatemala Corporations for this because the Guatemalan Corporation ownership cannot be determined from public records. If the Corporation has no bank account well then no one is the signatory on any bank account and then it would be extremely difficult for the collection attorney to prove the debtor was not at arms length (properly distanced) from the corporation that held the liens. See how hard it gets for the collection lawyer. Real hard and it is so confusing for them they will just throw their hands up in the air out of frustration. Remember they received no training on foreign corporations, foundations, etc and these attorneys were not the academic scholars of the law school (law review) to start with. They will be most unlikely to go and do hours and hours of research to try and figure things out and even if they did, they would need to prove to a judge conclusively what was going on regarding ownership of structures and funds. Judges do not collect evidence they just review it. In the absence of publicly available ownership records they really have no way to go so what do they do? Not much. Now if you have no assets that come up in any public records search the collection attorney may not know that you have these assets. This of course enables you to bargain a settlement for less than the face value of the judgment. Getting a settlement of 10% today beats holding a judgment with nothing to collect it against. Always think cheap settlement as a way out. The collection attorney when seeing he is confronted with an offshore structure may easily persuade his client to settle cheaply. If the client is dumb, emotionally charged and wants to chase you to the ends of the earth try reminding the collection attorney that when his client gets nothing from you he is likely to turn his anger towards the collection attorney to recover his expenses and legal fees. This will infuriate the collection attorney but it will sink in. If need be make the client know he should be seeking independent counsel to sue the collection attorney. If you really want to drive the point home call legal malpractice attorneys in the city of the collection attorney. Of course never tell them you are the collection attorneys client, no need to lie, just say you prefer not give your name at this time. Describe the case, name the collection attorney and say you are calling to see if there is a case for suing the collection attorney to recover legal fees since he bungled the case and describe the case. If the lawyer asks you if you are the client, decline to answer just say you are an interested party, no need to lie and of course you are an interested party. Call a handful of malpractice lawyers in his city. Odds are great at least one of them will call him and tell him there is someone looking to sue him to recover legal fees and describe the case. Sure the lawyer could lose their license for making such a phone call but what else is new.

More Collection Attorney Tactics – In the interest of trying to collect the money the attorney will attempt to get you to reveal what is going on regarding your asset protection. He may not have any knowledge but may have suspicions. This will come in the form of some post-judgment collection action possibly in the form of written questions, serving you with an order to appear before the judge or taking your deposition on the record or some other means of grilling you under oath. Before we go too far into this let us set the stage and identify the cast of characters. The vast majority of debtors that they question will lie even under oath. The jails are not full of people who lied under oath in civil collection proceedings. Prosecutions are usually reserved for lying in criminal cases. Today if one lied on a credit application they are prosecuting people for this, which used to be a civil fraud. So bear in mind collection attorneys rarely ever get anywhere this way so don’t go off expecting this to happen for sure. We are not telling you to lie. People often fail to answer written questions or even questions in a live deposition. People fail to show up when served for post-judgment questioning sessions at court or in the lawyer’s office and the lawyer has to show up along with a paid court reporter. People will secretly hide their assets before answering questions. People will answer questions as to where their assets are and then go run to the bank and take the money out thirty minutes later before the attorney can do anything. In some places the judge will tell the collection attorney to take the client out in the hall and instruct the client to answer the attorney’s questions, if the attorney brought the debtor in on a motion of some sort. When the client lies, objects with grounds, denies knowledge etc. the judge loses patience and tends to leave the collection attorney on his own. If the debtor indicates he has the knowledge and refuses to answer well then the judge threatens him. If the debtor has an attorney present then it will take a different tone. The judge sees this as a waste of time and tries to dispense with these matters as quickly as possible. Courts are not collection agencies. Now the collection attorney has a client and he wants to be paid by said client and does not want this client screaming mad at him for wasting his money. This means he is going to tell the client about this option but will not be encouraging about it being a probable productive solution to collecting the debt. Many collection attorneys will not go beyond attacking a fixed asset they can find like real estate, a car or a business because it is so rarely productive. Wage garnishing happens in some jurisdictions but it often results in a bankruptcy, the person changing jobs or the person petitioning the court to give them relief in the form of a much lower payment or even no payment for fixed time period. The debtor gets a charitable attorney prepares a budget presents it to the judge and shows that they cannot pay much or at all. The debtor makes sure his shabbily dressed kids and wife show up in court. The judge reduces payments or suspends the collection with review possibilities later on. Courts are government agencies and are anything but impartial and they do not want poor people down and out moving towards welfare and public assistance, so why should they put someone on the welfare rolls just because you have an expensively obtained judgment against them. If a person is on welfare they are usually somewhat exempt from judgment collection. It boils down to whom the heck are you, and the answer is generally nobody in the eyes of the court so go take your judgment and put it under your pillow and make a wish that it becomes collectible someday. It is extremely rare that a large billion-dollar corporation will ever go beyond getting a judgment against you unless you have easily attached assets readily attachable. This includes their common grudge lawsuits against small competitors. They will record the judgment and that is it. They pay so much for their lawyers that collection of a judgment rarely makes economic sense. Sometimes the big guys are really after orders preventing you from doing something that they do not like. They hire firms with 900 lawyers and 2000 assistants. The judges favor them since they are politically active. How much money did you give to judges seeking election and other political candidates this year? See what I mean. No one cares about you but they care about these big firms. These law firms will bill out their services at $300 to $1200 an hour. They are rarely cost effective for collecting judgments. These law firms are almost impossible to win against unless you hire another law firm as big as they are in the area. Then expect a settlement since they will have lost their edge. We have many times been told by clients the stories of their past litigation experiences where they hired small to medium sized law firms to fight the giant firms. Never recall anyone of them ever winning. The large firms have deep pocket clients who keep running up the legal bills until you drop out or just become inactive in the lawsuit and they get the upper hand. Clients do not ask their law firms how many times they litigated against the giant firms in the area naming them and asking for their success rate. Clients do not often go to the courthouse and pull the records of the litigation for the giant firms to see whom they lost to and consider those law firms. The area of specialization could be incorrect so be careful using this tactic.

Avoiding the Collection Attorney Altogether – The way to do this is to keep your onshore physical assets in the name of anonymous Guatemala or Ecuador Corporation. This keeps the assets from popping up when a collection attorney does an asset check. Before a lot of litigation is started an asset check is made to see what they can get if they sue you and win. If they see no good identifiable assets then they may think better about spending money to sue you. If they do sue you after not having to be able to identify any attachable fixed assets or bank accounts, they may just take the judgment and file it waiting for your rich uncle to leave you an inheritance some day. Sometimes they file lawsuits just to spite you and ruin your credit. So your best defense is litigation target minimization. The time to do this is before you are being sued. It can still work after the lawsuit is filed but it is not as strong. It can be argued you shifted assets because you knew you were in a lawsuit you were likely to lose. An ounce of prevention can replace a pound of cure. The ultra rich routinely do this and keep very little in their own names for these very same reasons. It is really hard to collect against assets you have no knowledge of. It is of course much better to keep as many of your assets offshore owned by anonymous corporations with bank accounts in bank secrecy countries.

Living Without Fear of the Lawyers and Courts – This can be easily done if you have some money. You have to be self-employed or retired. Will not work if you have a job or a substantial business with assets in the country where the creditor and judgment are. You keep no fixed assets in your name in the county you live in. Rent, don’t buy. Lease cars but do not put too much down on the lease. Before the lease is up trade it in for another leased car. Never buy a car on payments or cash. Keep nominal funds in the bank in your home country, say enough to live for a month or two at most. Use offshore banks, and offshore credit cards. Best to get your money from ATM machines and pay bills with money orders. Want a boat or an airplane, and then register it to an offshore anonymous corporation, which no one owns. So if done correctly you can ignore lawyers and their lawsuits. They may at times file a judgment against you but would rarely go beyond that. It really helps to keep your address out of any database. Have others take out phone, Internet and utilities for you. Register cars to another address. Have banks use another address. You can always rent a room or cheap apartment for an address. You can usually have multiple addresses in most countries. Have the mail go to the address other than the one you live in most of the time. Pick up the mail every few weeks or have someone deliver it to you. Never sign for any mail or packages at the address you reside at for real. Never sign for any fed ex, ups, dhl at this address. If anyone comes to the door you do not know do not answer it. Sometimes the process server uses a young woman made up to look like a teenage girl with a big guy hiding out of site who will serve you. Put a cheap camera in aimed at the doorway so you can see who is at the door without speaking to them through the door. Sometimes a process server can be a law enforcement officer. If someone says he is not here they may start with open the door, where does he work, do you know where he is and all that police state questioning. If the process server law enforcement or not comes to the door three times they will generally return the papers with a no service notation and ask for more money to keep going back. Rarely would the lawyer pay for repeat service. The lawsuit can die this way with no service. They may try again in a few weeks or months and again get same answer. The lawsuit will be on file in the court but eventually get dropped since there is no service. Unless there are extenuating circumstances like it is a company with billions of dollars after you on a grudge lawsuit it will probably die if you duck service a few times. The lawyer will have someone search the credit bureaus and databases for another address and not finding another address they should give up. They could take a judgment by publication in a newspaper. This is rarely done because you can reverse the judgments later on easily. It could be used as a tactic to get you come out in the open, so ignore it. You are on a cash basis for the most part (car leases excepted) and have dropped out of the system. If you rack up a lot of judgments anyway, you just have to start putting larger down payments down on you car leases. Al Capone could lease a car with 40% down. Taking a leased car away to satisfy a judgment is very hard and is probably never going to happen. It is like taking a rented house away. Just keep trading the leased cars in on other leased cars before the lease is up. It is most important that there be no identifiable assets traced to you that can be attached. Low balance bank accounts usually would not qualify since they would expect you to remove the funds once the lawsuit started. If you take the time and trouble to do this you can live in the respective country and ignore the lawyer harassments. To get serious help you need a local private detective who is a skip tracer. To guard against them giving you over to your creditors for a finder’s fee you need to hire a lawyer who has a relationship with such a private detective. The lawyer then hires the private detective to assist you and the private detective knows better than to turn the lawyers client over. This would result in lawsuits and loss of license for the private detective. The private detective will be able to tell you about police records, fire dept records and ambulance call logs, newspaper delivery subscriptions, water bills, electric bills, garbage bills, phone bills, cable bills, internet bills and all the other tricks they use to find people that would be unique to your local area. You really cannot get this from a website or book. You need someone that is currently skip tracing in the local area. They will tell you how it is done. Your weak spots will be the collection lawyer hiring a private detective to find your family and friends. They illegally access their phone records, email and bank records. Then from there they find you. This is really much more of a law enforcement tactic than a collection tactic. Watch the phone hard. Some collection companies send people free pre-paid phone cards saying it is some bonus for something. They sell these things to collection attorneys and private detectives commonly. They come in nice brochures with letterhead etc. They usually denominated at $5.00 or $10.00 but $25.00 is also available. If the people use the card, they have the legal right to access the call logs for the card and thus they have leads to follow. Maybe even use a cell phone that is anonymous and prepaid or skype. Have the skype account in an offshore credit card and use a proxy server when accessing it so there is no record of your IP address. Skype records are in Austria so it may be extremely difficult and costly to attempt to get these records from another country on a civil matter. It is all a question of knowing what the local situation is for skip tracing. Do not try it yourself. All it takes is to overlook one thing. Even have your lawyer hire two different skip tracing experts and compare notes. It can be done. Law enforcement people are not that helpful even if you friends with them. They have methods and tactics not available to a private collection firm or attorney. They go around and question people. They go to the bank and look at records freely in the high tax police states. They can go to your doctors, dentists and pharmacies for assistance. It is not the same thing.

Financial Enemies Coming to the Offshore Country– Let’s say your financial enemies somehow found out you had assets in Ecuador, Guatemala, Mexico or Costa Rica like real estate, bank accounts and stock brokerage accounts. Ok let us get more specific. They have reason to believe or think corporation or foundation held assets belong to you or they can conclusively prove that to be the case? It is most difficult to prove that you own a corporation since the ownership is not publicly recorded anywhere. Essentially you would have to tell them you were the owner. Why would you do that? See the problems for the other side. With an Offshore S.A. Corporation ownership is based on who owns physically the stock certificates, which are made out in, blank hence the term bearer share. Think of the old bearer bonds – whoever had the bonds, owned them. Guatemala & Ecuador Bearer Share Corporations are a nightmare for a collection attorney but let us say one tried to come to Guatemala or any other country using bearer share corporations. Ok they file something in the court having of course retained a local law firm, which would be expensive and discouraging at the same time. What the heck are they going to file in court? Chances are great that whatever events resulted in the underlying lawsuit causing the judgment did not occur in the country thus local courts would have no authority. The venue would be incorrect and the case would kick out on the first go around. These offshore countries will not enforce the foreign judgment. If they did enforce such judgments then the banks and corporations would be gone almost overnight. Now why would a judgment holder spend probably $25,000 to hire an offshore law firm and go through this exercise of futility? They wouldn’t. Even if they could show that you were the owner of an offshore corporation, the assets of the corporation are those of the judicial entity not yours. You can’t sue General Motors because the shareholders in GM have debts out for collection; forget the fact that General Motors is currently broke for a minute. The foreign judgment holder has no discovery rights in the offshore jurisdiction. The foreign judgment has no standing there. There has to be a case filed in the offshore country in the civil courts and to do this there has to authority, venue and a cause of action, which cannot be a fishing expedition to get to use the subpoena power of the courts to make your case. You need evidence before you are going to get any discovery powers from the courts. You could also have the funds go to a Corporation bank account in Guatemala or Ecuador and then move them onto another corporation bank account in say Costa Rica and then to yet another corporation bank account in another jurisdiction like Mexico. The collection attorney may die of old age before he finds your money even if he had some grounds to get into the first country bank records. You of course keep the funds moving around as the attacks come to your attention. It is a dead end for a collection attorney to chase funds offshore. Their main attack will be getting the home country judge to order you to repatriate the funds where they can be seized. Many judges refrain from doing this and if you work with us there are ways t avoid this with International Trust Agreements. Feel free to inquire.