Take these three scenarios: You are driving your car one day and you rear-end another driver unintentionally, or a tree in your yard fells on your neighbor’s roof. Or, your company – that is still on its teething stages – supplies faulty items that caused damage. You are likely to get sued, not for something that you saw coming, but events out of your control.
What to do to protect your assets especially when the lawsuit involves more than one party?
- Be Insured
The first thing – and hopefully you are not too late – is ensuring that you are sufficiently insured. Find a home insurance companies that will cover your assets, your home and if it extends to it, your business so that lawsuits don’t bring it to a halt. Homeowners’ insurance will cover anything from dog bites to trees falling on roofs and smashed windows.
Automobile liability insurance caters to damages caused during accidents and basically anything that pertains to an automobile accident. Your insurance company should have a complete package to cover your business.
- Form a Trust
If it becomes apparent that you would lose your property to a creditor, you may want to have a trust take charge of your assets. The trust will be in charge of the asset sunder them and they will even have the right to sell in the event that becomes necessary. Since a trust is a legal entity, you should consult an attorney to be sure that you are getting yourself in the right position legally. As long as the property is in the care of a trust, your creditors cannot touch it.
- Form a Limited Liability Company
An unlimited liability plan exposes you to risks. Debts of a sole proprietorship business or a partnership are borne by the partners or business owner and they are legally obliged to pay them to their full extent. This changes when in a limited liability company. The business assumes the status of “legal person” and becomes free of its founders. Your personal property is safe under this plan as it would not be sold to offset your business’ debts.
- Take advantage of Bankruptcy Chapters
Under Chapters 7 and 13 of Bankruptcy, you are allowed to exempt property from being claimed by creditors and so you may want to exempt those that are personal to you. Property that is exempt is protected by both federal and state law and will not be touched when your property is claimed to repay your debts.
Filing for bankruptcy is overall a good way to protect yourself as the law will put in place an automatic stay that will instantly keep the creditors away as long as you comply with its stipulations.
Use the Law to your Advantage
As long as you are in business you should take all sorts of measures to ensure you are safe in case of a lawsuit. Protecting your assets will mean that you spend money on an attorney and even sometimes depending on the nature of your assets, an accountant, but it is all worth it.