One legitimate way people protect their assets prior to a debt collection is by having them converted into equity in a home in Florida, Massachusetts, Texas, Kansas, Iowa, Minnesota, Oklahoma or South Dakota, because of the large homestead exemptions available in these states.
Protecting Assets Through State Bankruptcy Homestead Exemptions
In these states, creditor exemption laws give the debtor full protection for equity accrued in any dwelling home from creditors who want to add real estate assets to their claims. What Bankruptcy Homestead Exemptions basically cover your ass so that creditors cannot claim the equity you have in a “primary” residence. In Massachusetts for example you are allowed $500,000 homestead exemption. But, as with all things, there are angles which could work against you. In Florida, they offer an unlimited exemption only for long term residents because lawmakers found that many people were moving to the state just to take advantage of their generous bankruptcy homestead exemptions. So the state legislators responded by requiring one to live in the state for a certain length of time to be eligible for so-called “last minute homestead protection”.
There seems to be a trend that judges are cracking down on those with whom it is apparent that they moved to the state for no other justifiable reason other than to hide assets through homestead exemptions. As usual, it only takes a few to spoil it for others. These sorts of laws exist in all of the above states, so its best to examine the specifics in each state that offers these exemptions. It is best to get your ducks in a row and set up a residency in these states well in advance of a looming lawsuit or debt recovery process.