The Dominoes Keep Dropping
It all started in July of 2007. The banks stopped lending and asked for collateral increases. Mortgage brokers and smaller lenders sought the safe haven of asset protection. From small local operations to national, publicly traded companies, we were representing dozens upon dozens of brokers, lenders and financiers. Back then no one could yet foresee what was to come a year later.
Then late this summer it started in earnest. Owners and executives of banks. Real estate developers. Car dealers. Restaurateurs. Construction companies. Who is next in line?
The past year has been the golden age of asset protection. Fortunate for us, very unfortunate for our clients. What should you be aware of in this economy?
The greatest exposure to your assets in this economy are your loan guarantees. Business owners of all types routinely guarantee debt and lease obligations of their businesses. Works just fine in a good economy. What happens in a down economy?
Businesses begin to default on their loans, or at least anticipate the possibility of a default. Calls on personal guarantees become a real possibility. Personal guaranty calls are made by banks and other lenders. What kind of creditors are these?
Unfortunately for our clients banks make for very aggressive and intelligent creditors. With these creditors it is never sufficient to take the cheap and easy route. Strategies like quitclaiming the residence to the other spouse, gifting cash to kids or creating sham liens on real property will never work. Most banks employ either in-house collection attorneys or outside collection law firms. These lawyers are tasked with aggressive pursuit of debtors, and they know their stuff. If you rely on hiding assets, camouflage or sleight of hand, they will easily get to your assets.
When protecting assets from a bank, the asset protection strategies used to shield the assets of the individuals who signed personal guarantees have to be formidable. They have to be sophisticated. They have to create a significant litigation risk for the bank. If our strategies can make it very pricey and time consuming for the bank to get to our clients' assets, we can force the bank into a better settlement with our client. That is, better for our client.
The one common theme that runs through all of these asset protection plans is to plan early. Plan before there is a default. Plan when the possibility of default first becomes a coherent thought. Any last minute planning can be set aside a lot easier than advance planning. Talk to your clients today about what they should be doing to protect their assets. Tomorrow, maybe too late.
Yes, we did make that sound a bit dramatic. Simply because it is true. We are turning away more clients than ever. Not because we are super busy (which we are, as expected in this economy, to the point that we are sending some work to our competitors), but because they make it to our offices when it is too late to do anything. Do not procrastinate, and do not allow your clients to procrastinate. Force them to plan before they become the next domino.