What can I do if I have 2 rental properties and want to protect my assets from frivolous lawsuits?

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What can I do if I have 2 rental properties and want to protect my assets from frivolous lawsuits?

The properties are in LLCs. I am a federal retiree and I still have money in the Thrift Savings Plan. Is that money exempt from judgments? Also, if you own a home with a mortgage, or rent out a home with a mortgage, and have some equity, is only the equity subject to judgment and not the amount there’s a mortgage on?

Asked on June 19, 2015 under Real Estate Law, Florida

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 8 years ago | Contributor

The Thrift Savings Plan itself is protected from collections (e.g. garnishment or execution), but be aware that after you withdraw money from the plan, if you put into a regular bank account, at that point it--along with any other money in the account--could be reached by creditors.

If there is a judgment against you, a lien may be put on real estate. The lien amount is not limited to the amount of equity, but the mortgage will have priority, which means that if there is a forced sale, the mortgagee (the lender) is paid first, and only if there is something left over, does that amount go to a judgment lienor.


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