Post-Judgement Discovery – Creditor Want To See Your Assets

If a creditor successfully obtains a judgement against a debtor, the next step in the legal process is for post-judgment discovery to occur.  This is also sometimes referred to as discovery in aid of execution, and it is through this process that creditors typically get a glimpse of the assets owned by judgement debtors.  Such assets usually include liquid assets like cash, stocks and bonds, interests in business entities (e.g. corporations, limited liability companies, or family limited partnerships), retirement plans (e.g. IRA accounts), asset protection trusts, and real estate.

What Must Be Disclosed and When

The beauty of having a well-formed asset protection strategy in place is that you don’t necessarily have to wait until the post-litigation stage to disclose your assets.  In some cases, our clients have been able to completely deter and avoid litigation just by disclosing the nature of their asset protection plan.  This, of course, occurs prior to litigation.  In other cases, litigation proceeds and if a judgment is obtained, it can often be settled for “pennies on the dollar” because of the impossibility of breaking into a good asset protection plan.

If you ever find yourself in a post-judgment deposition, you must not lie or withhold any information.  Doing so can (and will) get you in big trouble that can include a finding that you’re in contempt of court.  But the need to lie should not play any role in your asset protection planning.  It’s illegal to lie in any court-sanctioned proceeding, and none of our asset protection plans will ever require any measure of dishonesty.

Moving Before Post-Judgement Proceedings

One question that some people involved in litigation have is “What if I move to another state after the suit is over but before post-judgment proceedings like discovery in aid of execution?”  The answer depends largely on the judge involved.  Some judges conclude that the court maintains continuing personal jurisdiction over the debtor and will require the debtor to travel back to the former state of residence–the state where the case was litigated.  Though in some circumstances, the judge will require the creditor to pay for the debtor’s travel expenses.

Other judges, however, won’t take things quite that far.  In some instances, the presiding judge will require the plaintiff-creditor to domesticate the judgment in the debtor’s new home state.  If that happens, all post-judgement discovery occurs in the debtor’s new home state.

The fact that there’s no clear answer to the question of what happens if a debtor moves–the fact that judges have a huge amount of discretion and limited accountability for their decisions–is the main reason we incorporate an offshore planning component in many of our asset protection strategies.  That allows you to remove your assets from the jurisdiction of U.S. courts without violating restrictions against fraudulent transfers.  The trick is that your planning must be done well in advance of any claims being brought against you.