In North Carolina, a Plaintiff (the party filing a lawsuit) can seek an “Order of Attachment” in certain circumstances. Generally, this means that any property in North Carolina that the Defendant owns, including bank accounts, can be seized by the County Sheriff to satisfy any eventual judgment pending the outcome of the lawsuit. This can be problematic for several reasons: first of all, the Plaintiff may lose the case and not be awarded any damages and the property was seized unnecessarily! Also, at the beginning of a lawsuit, the number that a Plaintiff claims he or she has been damaged may not be a realistic number and is based purely on their opinion of the case. Having large sums of money seized during the pendency of a case (which could take years to settle) could cause a business to go bankrupt.

          Thankfully, an attachment order will only be issued in a few circumstances. The Defendant must be:

• Nonresident of North Carolina;
• A foreign corporation;
• A domestic corporation whose president, vice president, secretary, or treasurer cannot be found in North Carolina;
• A resident of North Carolina who is intending to defraud his creditors by leaving the state or avoiding service; or
• A person or domestic corporation who is trying to remove property from the state or dispose of property in order to defraud their creditors.

If you as the Defendant do not fit into one of those categories then, in general, an order of attachment cannot be granted against you or your business. However, if you do fall into one of those categories, any property you own in North Carolina can be attached pending the outcome of the lawsuit.

The Plaintiff must pay a bond to the Court which must be high enough to compensate the Defendant if the Defendant prevails in the lawsuit or is damaged by an improper attachment. Obviously that bond will greatly vary and is somewhat up to the discretion of the judge who is hearing the attachment order.

Fortunately, if you have received an attachment order, you do have options to dissolve or modify the order. To dissolve the order, you must show that something was done improperly in obtaining the order (for example, that you do not fall into one of the categories of people who can have their property attached). If you are unable to make that showing, you can try to have the attachment order modified—either the amount of the attachment, the bond, the terms, or both.

Attachment orders are just one more way that lawsuits can cause problems to the people involved. If you, or someone you know, receives a summons, attachment order, or notice of garnishment, the attorneys at Jesson & Rains, PLLC are ready to assist.

​By Attorney Kelly Jesson

Creditors come in all shapes and sizes: ex-spouses, bankruptcy, personal and business debts, and claims involving real estate or professional malpractice. People in high risk professions or who deal with circumstances that are prone to litigation sometimes want to take steps to protect assets. However, this must be done before a dispute arises, because moving assets around afterwards can sometimes be deemed a fraudulent conveyance and voided by a court.

Unfortunately, there is no “magic wand,” and protecting assets oftentimes involves investing your earnings into protected accounts, such as life insurance and retirement. An individual’s retirement account is exempted from their own creditors (but not from a beneficiary’s creditors once the assets are inherited, which will be discussed in the next blog dealing with asset protection in estate planning). The cash value of a life insurance policy is also protected from the insured’s creditors, but again, not from a beneficiary’s creditors once the assets are inherited.

Additionally, the state of North Carolina exempts certain amounts of property from creditors:

• up to $35,000.00 of the value of the debtor’s or dependent of the debtor’s residence or burial plot, except if a debtor is 65 or older, they may exempt up to $60,000.00 if the property was previously owned with a deceased spouse (known as the “homestead exemption”)
• up to $5,000.00 of the value of any property if the debtor has not used their entire homestead exemption
• Professionally prescribed health aids for the debtor or a dependent of the debtor

• up to $3,500.00 in value of one motor vehicle
• up to $5,000.00 in value, plus an additional $1,000.00 for each dependent of the debtor, not to exceed $4,000 extra total for dependents, in household furnishings, household goods, clothing, appliances, books, animals, crops, or musical instruments, that are held primarily for the personal, family, or household use of the debtor or a dependent of the debtor
• up to $2,000.00 in value of professional books, implements, or tools of the trade
• up to $25,000.00 in funds in a 529 college savings plan.

One of the most important things you can do is title property as “tenants by entireties” (TBE). If a husband and wife purchase property together, by default, it is owned as TBE and is therefore protected from the creditors of just one of them, meaning a lien will not attach. However, if a creditor gets a judgment in both spouses’ names, a lien can attach. Also, if the spouses divorce or one passes away, a lien can attach if the remaining owner is the debtor. Another alternative or high-risk professionals is to have the low-risk spouse own the majority of assets because they will not be responsible for debts unless joint.

Another really important step is for self-employed people to form businesses and formalize businesses to protect assets. If you follow business formalities, business creditors cannot reach your personal assets for business debts. If you own investment properties, you are running a business. In fact, the definition of “operating a business” is pretty loose, and oftentimes people will move high-value assets over to LLCs for asset protection purposes. Again, you must follow business formalities (set up a tax identification number, maintain a separate bank account, have an operating agreement).

If you own a business but you have personal creditors, those cannot reach assets titled in the name of your business. They are limited to collecting only the distributions you receive from the business, which you control as the business owner. Distributions do not include your pay made through payroll, which is another reason to run your business like a business.

Finally, we’re often called by people to set up trusts to avoid creditors. General living trusts or revocable trusts are not protected from creditors of the grantor (the person who sets it up), although the funds could be protected from beneficiaries’ creditors after the grantor dies (the subject of our next blog). North Carolina residents have a few not-so-great options: First, they can set up an irrevocable trust for the benefit of others. For example, if you are married, you can create an irrevocable trust that benefits your spouse for his or her lifetime.  Presumably, your spouse will take care of you while you’re married, so you will indirectly have access to the money you put into the irrevocable trust, although on paper it will no longer belong to you, so your creditors cannot reach it. This obviously has risks, but it is an option.

Another option is an asset protection trust. In an asset protection trust, the trustee has discretion to distribute money to the grantor as well as other beneficiaries. These trusts are not valid in North Carolina, although they are available in seventeen other states and other countries. However, North Carolina residents can pick the situs (jurisdiction) of their trust and where the trustee is located, meaning, for example, that you can state that Georgia law applies to your trust even though you live in North Carolina. However, lawmakers in North Carolina have questioned whether this practice is valid for asset protection trusts, and, therefore, there are some risks involved. Of course, transferring funds to another country is always risky.

If you are interested in implementing any of the above ideas in order to protect your assets, please give the attorneys at Jesson & Rains a call!

By Attorney Kelly Jesson

​Business owners around the country are starting to reopen their businesses up to employees and customers. However, regardless of government announced “phases,” businesses owe a duty to their employees and customers to keep them safe while on the premises. Lawsuits are starting to pop up, according to Market Watch.

What can you do to limit your potential liability? Businesses should follow healthcare and government recommendations, such as wiping down surfaces, frequent hand washing, wearing masks, socially distancing, etc. These recommendations sometimes change, so business owners should stay abreast of updates. Keeping your employees from getting sick on the job in the first place is key: in a worker’s compensation case, all the worker has to do is prove they were injured on the job and there’s a causal connection between the two. For example, a grocery store cashier may have a claim due to exposure to the public. A worker’s compensation claimant does not need to prove that the business was negligent.

For businesses that don’t have a large volume of public traffic (such as law firms), owners may ask patrons to sign a document before coming into the premises stating that they do not have COVID-19, are experiencing no symptoms, and they have not been around anyone with COVID-19 or who has otherwise been experiencing symptoms. While patrons can, of course, lie on these forms, at least it’s one additional step that business owners can show that they are taking to
protect their employees and other customers. Showing that you are taking the necessary steps to keep people safe is important in defense of personal injury lawsuits, where the plaintiff has to show not only causation (that they caught COVID-19 at your business) but negligence (that you failed to act with reasonable care).

A defense to a negligence action is “assumption of risk.” Some business owners may ask patrons to sign waivers of claims, saying that the patron is “assuming the risk” of contracting COVID-19 by coming to their establish. For example, someone who voluntarily eats at a restaurant or goes to a nail salon knows that there is a risk that they may be infected, and a business is not guaranteeing 100% that they will not be infected, because there’s no way to do that.

Governor Cooper provided business owners with extra protection a couple of weeks ago when he signed the Coronavirus relief bill. The act provides for limited liability for businesses deemed “essential” under the Governor’s prior stay-at-home order. If an employee or customer gets COVID-19 from spending time at an essential business, the business is not liable for damages unless it is “grossly negligent” or worse. Gross negligence is a higher standard than simple negligence. Instead of a plaintiff showing the absence of reasonable care in a negligence lawsuit, a plaintiff would have to show the conscious disregard for reasonable care to prove that a business was grossly negligent.

While essential businesses should be comforted by this law, we are of the opinion that this should not change how they do business. In fact, if they consciously fail to abide by social distancing and cleaning protocols, they could arguably be grossly negligent.

If you have any questions about how to prepare your business for reopening, give Jesson & Rains a call!