Fraudulent transfers beware! The Florida legislature has revamped the statute governing proceedings supplementary. The changes will go into effect July 1, 2016. The good news for creditors is that all the same avenues to attempt collection are still viable, including debtor examinations and actions for fraudulent transfers. In addition, the changes clarify that the statute of limitations for fraudulent transfers remains 20 years as opposed to 4 as set forth in the Uniform Fraudulent Transfer Act ("UFTA"). The revisions will streamline an often confusing process both with attorneys and the courts in Florida. There is also good news for debtors and third parties. Now, instead of blanket motions for proceedings supplementary followed by a fishing expedition for transfers and assets, the creditor must describe property being held by the third party before impleading that party. This will require that the creditor have a legitimate reason before dragging a potential third party recipient of a fraudulent transfer into court. The new rules also require that the third party be served with a notice to appear and directs the third party to file an affidavit explaining why the asset transferred should not be turned over to the creditor. This procedure provides the court with a process and a quick resolution of the issue. If the third party fails to comply presumably the court will enter an order requiring the asset be turned over.
Florida provides excellent protection for collection against marital property by presuming that the property is held as tenancies by the entireties. Tenancies by the entireties means that property is held by husband and wife jointly with rights of survivorship of 100% of the property without the ability to sever the property. Therefore, a creditor cannot partition any part of the property. This allows a debtor to shield assets held jointly with a spouse. A creditor has the right to challenge the presumption but the burden is on the creditor to demonstrate that the property is not held as tenancies by the entireties to satisfy a debt due by one spouse.
When handling collections of debts, what would make my job a lot easier is if the debt itself was evidenced by writing. This could be in the form of an invoice, purchase order, promissory note, personal guaranty or contract. However, any written memorandum signed by the debtor will work. I have sued on handwritten notes more than once and have always been successful in obtaining judgments thereon. I have also sued successfully on checks evidencing payment on a portion of the debt. Therefore, my advice to everyone is obtain written evidence of the debtIn addition, the writing should include as many terms as possible. For example, a contract, purchase order or invoice should include the specific terms of payment as well as provisions for interest. My clients often want me to include a claim for interest. Right now, the legal rate of interest in Florida is roughly 4.75% per annum which is rather low. By specifying the interest rate to be applied in writing, you may obtain interest up to 18% legally per annum in Florida.
A recent Third District Court of Appeal decision clarifies when a shareholder may bring an action on his or her own behalf against a third-party or must bring the action on behalf of the corporation as a derivative shareholder suit. A derivative action is one brought by a shareholder on behalf of a corporation for damages sustained by the corporation. An example would be when an action of a third-party causes the devaluation of the stock of the corporation. Only the corporation can bring suit for that and any collection must be shared between all shareholders. Obviously, a shareholder would prefer to bring such an action in his or her own right so that any judgment would then only be in favor of the shareholder and he or she would not have to share the award with the other shareholders.
Collection of a judgment, I often tell my clients, is the hard part of the litigation process. Obtaining a judgment against the debtor can often be rather easy to achieve in litigation, especially when a debtor fails to respond to the lawsuit. The real challenge for a creditor and its attorney is attempting to collect on that judgment. Unfortunately, rarely does a judgment debtor receive the judgment and immediately send payment. Instead, the creditor needs to be prepared to chase that debtor to obtain payment.
I often get asked if its possible to collect on a judgment against a dissolved Florida corporation when the same principal has opened up a new company. If the new company is similar to the previous company, a judgment creditor can attempt collection in Florida against the new company under the legal theory that the new company is a "mere continuation" of the judgment debtor.
Garnishment is one of the most effective ways for a collections attorney to recoup funds for his or her clients. In the most recent legislative session, the Florida legislature has amended Chapter 77 of the Florida Statutes governing garnishment proceedings. The most notable change is that the amendment repeals Florida Statutes §222.12 which provided the procedure by which a creditor could challenge a claim of exemption as head of his or her household.