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The Panama Papers and Asset Protection Schemes

Tuesday, April 12, 2016   (0 Comments)
Posted by: Robert S. Bernstein, Esq. Pittsburgh, PA
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Even without the intrigue of tax havens, politicians, and the rich and famous, the current Panama Papers situation reminds us that there are ways that people (wealthy or otherwise) are creating asset protection schemes every day to make collection of legitimate debts more difficult.  This is true whether the creditor is a taxing collector or a business or personal creditor.  Whether the person has particular creditors they are trying to avoid or is just trying to prevent risk in the future, there are some fairly effective steps that can be taken.  Experienced creditors’ rights lawyers are pretty adept at attacking and unravelling these tricks when they are used to prevent an existing creditor from getting paid.  The dodges do make the chase more difficult and expensive for their creditors, but sooner or later just about all of them can be broken.

Many states and countries protect assets that a spouse owns jointly with the other spouse.  Transferring assets into joint names creates a hurdle for the creditor.  Transfers into LLCs (Limited Liability Companies) or similar vehicles, adds a step that the creditor has to get past in order to attack the asset.  Trusts (local or offshore) create increasingly challenging impediments to collection.  Combining these things to create a multi-level scheme can make unwinding it expensive, time-consuming and unappetizing to a creditor.  It can be done, with skill and patience, but it is still an impediment to the normal flow of commerce and the payment of just debts.

Robert S. Bernstein, an attorney with Bernstein-Burkley (Pittsburgh, Pennsylvania) and the Immediate Past President of the Commercial Law League of America, says “None of these is foolproof and a court can help see through them, even though the idea is to make them more difficult and more expensive for the creditor.  More sensible treatment by courts and legislature can limit or eliminate some of these weapons of the unscrupulous debtor (and their creative lawyers and accountants).”  Diligence and a willingness by creditors to attack these artifices will also help.  The debtors don’t expect to always win, but they do expect to earn discounts and settlements by putting up so many levels of roadblocks and walls.  Bernstein went on to say “As with the unscrupulous ransomware perpetrators of today, rewarding these people with settlements is distasteful.”  Unfortunately, the tactics often work, leading to a willingness to accept less than full payment in order to avoid the extra effort and expense to break them down.

View the authors CLLA Member Profile: Robert S. Bernstein (Bernstein-Burkley, Pittsburgh PA)


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