How Do You Protect Your Assets When You’re the Target of a Lawsuit?

Yes, if a creditor wins a judgment against you and you cannot pay, they can register the judgment against your property and apply to the Supreme Court for an order to sell your home. However, courts consider factors like hardship and whether you have other assets first.

Not once a lawsuit is threatened or filed. Under section 121 of the Bankruptcy Act, transfers made with the main purpose of defeating creditors can be reversed, regardless of when they occurred. Such transfers after a dispute arises are almost always treated as fraudulent conveyance.

For undervalued transfers, the claw-back period is 2-5 years, depending on circumstances (longer for related parties and if you were insolvent). However, for transfers made to defeat creditors, there is NO time limit under section 121 – these can be reversed at any time.

Generally, yes, superannuation is protected from creditors in bankruptcy under the SIS Act. However, excessive contributions made specifically to defeat creditors can be clawed back under sections 128B-128C of the Bankruptcy Act.

If you cannot pay a judgment and have insufficient assets, the creditor may petition for your bankruptcy. In bankruptcy, your non-exempt assets are sold to pay creditors pro rata, and after 3 years, you are typically discharged from remaining debts.

Yes, after obtaining a judgment, a creditor can apply for a garnishee order to have money taken directly from your wages or bank account. However, there are protected amounts – creditors cannot reduce your income below certain thresholds (currently $612.60/week in NSW).

Having a large mortgage means you have less equity for creditors to claim. However, if there is any equity after the mortgage is paid, creditors can still claim it. A creditor’s judgment ranks behind the mortgage, so the bank gets paid first.

A family trust can provide asset protection, but ONLY if established before any dispute or liability arises. Transferring your house to a trust after a lawsuit is threatened will almost certainly be treated as a fraudulent conveyance.

High-risk individuals include business owners (especially sole traders), company directors, property investors with tenants, medical professionals, and anyone in regular contact with the public. If you operate in a high-risk field, proactive asset protection is essential.

The best protection is a combination of: (1) adequate insurance, (2) proper business structures like companies or trusts established before any dispute, (3) joint ownership with spouse, and (4) not keeping excessive equity in your personal name. Professional advice is essential.