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In this three part series of articles we are going to discuss ways to immunize wealth and assets from lawsuits.  Part I (this article) will discuss the concept of being “judgment proof.”  Part II will delve into the concept assets that need to be protected.  And Part III will broadly overview ways to protect assets from creditor claims, making them judgment proof in essence.  Many people with “nest eggs” are rightfully concerned about ways to protect themselves against lawsuits.

It’s a given that people with “nest eggs”–people with any sort of significant assets–are prime targets for shark-like plaintiff’s lawyers.  It’s a concern we hear about every day at Lodmell & Lodmell.  The reason for this is simple.  The vast majority of plaintiffs lawyers work for contingency fees.  That means that they only get paid when their clients collect.  It follows, of course, that plaintiff’s attorneys target and sue only those people who are able to pay in the event that a judgment is won.

What Does It Mean To Be Judgment Proof?

So the question becomes: What is the best way to discourage aggressive plaintiff’s lawyers?  One way is to not have any assets.  People without assets are often termed “judgment proof” in the legal community.  Being judgment proof is an excellent form of lawsuit protection, because attorneys do not want to waste their time and effort pursuing individuals or businesses that will be unable to pay up.

Remember the concept of contingency fees addressed above?  When lawyers work on contingency fees, they do not receive upfront retainers from clients and they do not bill clients on an hourly basis.  The only way a lawyer gets paid on a contingency fee case is to win the lawsuit.  When a lawsuit is won, attorneys working on contingency fees are entitled to 30% and at times even 40% of the amount of the verdict.  In other words, plaintiff’s lawyers get paid only when they win a case.  If a plaintiff’s attorney loses a case, they get no compensation and are often “out” the expenses of litigation (e.g. court costs).

As a result, plaintiff’s attorneys must evaluate several factors when deciding whether or not to accept a new client.  They must determine the likelihood of establishing liability against the defendant (either at trial or for purposes of settling prior to trial), and they must determine the likelihood of the defendant’s ability to pay.  The latter–a defendant’s ability to pay–is by far the most important factor. If a defendant is judgment proof, as discussed above, then they will be unable to pay.  As the saying goes, “If you’ve got nothing, you’ve got nothing to lose.”  Pursuing a course of litigation against such a judgment proof defendant would be a waste of a plaintiff attorney’s time and money, because even if liability can be established, there is no way to collect.  And if there is no way to collect, there is no way for the shark-like plaintiff’s lawyer to get paid.

While plaintiff’s attorneys may market themselves as people who want to help the injured, they are really “in the game” for the 40% contingency fees they receive for winning or settling cases.  As a result, it’s an absolute anomaly to see a lawsuit filed against a business or individual that does not have assets and an ability to pay.

The takeaway from this article is very simple: Being judgment proof provides an excellent form of lawsuit protection.  It simply creates a huge disincentive for lawyers to take any action against you.  How this applies to a person with significant assets will be discussed in the third part of this series of articles: Lawsuit Protection Part III: A Judgment Proof Portfolio.

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Pashmina Lalchandani

CEO & Co-Founder, Bar & Cocoa / Owner, Flow Simple
December 9, 2010, Douglass was a client of Pashmina’s

I’ve known Doug in many contexts, as a friend, as a client and as a business partner and he impresses me on all levels. He’s dependable, smart, generous and I wouldn’t hesitate recommending him and his law firm to anyone.
He’s the best and most ethical lawyers providing asset protection with rock solid strategies to give you peace of mind about your wealth. Straight forward, and straight talk. Doug is exactly the lawyer I want on my side. If I send someone to Doug, I know they’ll thank me for it!

Social & Solar Entrepreneur, Pan Afrikan Theorist, Translator/Interpreter,
Founder & Visionary Leader @ Afrikanpride.
March 12, 2011, Marlon E. D. J. worked with Douglass but at different companies

Doug is one of the most powerful thinker i have came across. During the short time that i have known Doug he has been a great source of inspiration. He has a simplistic yet effective and accurate way to analyze anything you bring to his attention, and then by asking you key questions he gets you to see the light at the end of the tunnel. Besides being extremely bright, he is a genuine and caring individual which is why I feel fortunate to know him. I can say without a doubt that he his the person you would want to talk to if you were in need of a person with his expertise.
Most of the lawyers out there will probably meet your needs, but if you are looking for someone to exceed your expectations and give you that wow factor, look no more he is the person for the job.

Patricia Salter

Associate Dentist at Smileology
December 1, 2010, Patricia was a client of Douglass’

I have been a client of Douglas Lodmell’s since 2001. My main concern was asset protection in this litigious society. I can sleep alot better at night knowing I have the instruments in place to protect the fruits of my labor, and that they will not end up in the hands of a slick trial attorney.

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