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Can I open a business bank account to avoid a creditors levy for personal debt?
Anonymous5 views3 answers
in a nutshell. I have been in default for about 5 months on 2 big credit cards. I have some money in my personal checking account, but I can't use it to satisfy this debt as I am recovering from an illness and need to use the funds to live and pay day to day.
I foresee that they will sue me and eventually will try to freeze my bank account.
Is it possible to avoid a levy for my personal debt by creating an LLC with a fictitious name and then opening a business bank account for the LLC and transferring all my money to the business bank account?
I would like to protect whatever I have until I am able recover and work out settlements with them.
thank you,
Your strategy may work temporarily, but the creditors may eventually discover your ploy. However, since you imply that you have not yet been sued, it will likely be a while before you have to deal with judgment creditors trying to collect their judgments.
In an ideal world; things would work out as we expect. The problem with sole-proprietorship LLC's, is this: creditors tend to be a bit more agressive with sole-proprietorship LLC owners in collection endeavors--as they believe (as do their legal counsel) that the LLC is an attempt to shield liability--which is exactly what you are trying to do here, e.g. create an LLC AFTER defaulting on a personal debt. On the other hand, if the LLC had several members and an independent office location--then the LLC would look and feel more legitiate; thus, sole-proprietorship LLC owners tend to be sued more often than multi-member LLC's. Factors the creditor will look at include: 1) number of members; 2) agent for service of process; 3) type of business; 4) location of the business; 5) source of funds in the business savings account; 6) do you use the business checking account as a personal checking account, eg. buying groceries and movie tickets, etc.
As a practical matter, consider ways to prevent a lawsuit. Options include: 1) settlement; 2) sending a certified judgment-proof letter with EVIDENCE of your insolvency--to include proof that you have a medical illness that requires to use the funds in your savings; 3) set up hardship payment plan with creditor--to buy time for you to offer settlementdown the road. Sounds like no lawsuit has been filed yet--so, you (based on general factors) still have time on your side.
If considering forming an LLC, Nolo.com has a great book on the subject. Good luck.
No.
If this strategy worked everybody in the U.S. would simply run up debt in their own name and when the creditors come knocking on the door to collect, transfer their assets to an LLC or a Corp. This is basically a strategy to defraud the creditors and prevent them from collecting.
Perhaps a BK filing would be in order here. I have offices in LA, Riverside, OC and SB if you would like to consult on it. Based on the info. provided it sounds like your best solution if you qualify.
BW - 877-497-06027
