What happens if you need to do a short sale and you have cash?  If you do a short sale, you will have to fill out a financial statement and that’s where the banks will see where all your money is located.  The lenders will typically ask you to put in cash if they see you  have some, and will ask about money in 401(k)s and IRAs, but legally get their hands on it.

But many self-employed people have money stored in the form of liquid assets like bonds or stocks.  The money is in a brokerage account and at a drop of a hat, it will turn over to the government or a creditor.

So what can you do to prevent yourself from being in the same situation?  If you are a Realtor or have your own business, you probably want to hold onto the money that you’ve saved up.

Options

One option is to hold your assets like stocks, bonds and real property in a family limited liability company or family limited partnership.   The title is then held by an entity, not by you personally.  Of course, you have some type of ownership interest and so does your family.

If a creditor has a judgment against you (like a mortgage deficiency judgment) they have to put a “charging order” against your interest in the limited liability company or family limited partnership.  They cannot go and raid what is in there.  They have a claim only on what you take out, so if you take out nothing, they get nothing.

It isn’t foolproof, but the idea in all types of arrangements is to raise the costs of collecting the judgment against you.  Thus, you are making it harder for the creditor to obtain the money.  Instead they would be more likely to agree to settle with you for very little money.

Another option is to take your money and keep it in gold or silver coins, which will usually outperform “paper” assets anyway for quite awhile.  You do not have to tell a creditor where they are located in an event they get a judgment against you.

If you make it difficult for them to collect so that they have to do so legally, they will have to do the following:

1. Get a judgment in the state where the property is located
2. File for a “sister state judgment” in the state you live in
3. Give you notice of all of this and enough chance to defend yourself
4. Serve you with a summons for a judgment debtor exam.

Do not wear fancy jewelry at the exam (they can take it from you).  If you have exercised reasonable precautions, you can make it much more expensive for them.

But don’t think they can’t get a judgment against you or that nothing will ever happen.  There are a thousand things that can happen to jeopardize a person’s savings.