Generally speaking, yes, a judgment creditor can reach the assets of the trust during your lifetime.  Oklahoma law does not allow debtors to escape their creditors by simply moving their assets into a trust that may be revoked at any time.  

However, The Oklahoma Family Wealth Preservation Trust Act allows you protect up to $1,000,000 if certain steps are taken, such as 1) naming a co-trustee, and 2) investing the majority of the trust’s assets in Oklahoma assets, like Oklahoma property or stocks and bonds from an Oklahoma-based company.

Excerpt from Legal Guide for Starting and Running a Small Business, Steingold, Fred.  10^th Edition.  2008, Nolo Publishing.

More often than not, the only remedy available to the unsecured creditor is to file a lawsuit, proceed to judgment (an often lengthy and expensive process), and execute against whatever property of the debtor can be found, provided that is not exempt from execution, e.g. homestead.

Here are some tips for unsecured creditors:

· Assure yourself that the customer is credit worthy.

· Get all the information you can about the debtor, especially bank accounts, employer, and ss#.

· Start your collection efforts early. American Express sends me an electronic notice 5 days before the payment is due.

· Be aware of any statutory liens that are available to you, such as laboror’s liens and UCC liens, and be prepared to use them.

(See related post, dated September 16th, 2009)

• The Parties
• Description of the goods or services to be procured
• Delivery/Performance
• Price and Payment
• Length of Agreement
• Termination of Agreement
• Warranties
• Indemnity
• Limitations of Liability
• Misc. Clauses, e.g. choice of law

Call me old fashioned (or naïve), but when you enter into an agreement and the other party has lived up to their end of the bargain, then you should also. In spite of this, I frequently receive requests for settlement. It goes something like this: “I owe your client $50,000 and yes, your client’s service met our expectations. But, can I send you a check for $25,000 and call it even?”

There are valid reasons for nonperformance of an agreement, but they are rare. Accountability is crucial in our society. Therefore, I have no qualms about garnishing and seizing assets when the debtor has no justifiable reason for nonpayment. Maybe I missed the newsflash, but since when is a deal not a deal?

In order to avoid a breach of contract lawsuit, the debtor agrees to sign a promissory note, which provides for regular monthly payments on the principal and interest. A shrewd business owner will require a “confession of judgment clause” in this promissory note as an enforcement tool.

The confession of judgment clause allows your attorney to appear before a judge and secure a judgment without process. The clause may read like this:

To further secure the payment of this note, Debtor irrevocably authorizes any attorney of any court of record to appear for Debtor in term time or vacation, at any time and from time to time after payment is due, whether by acceleration or otherwise, and confess a judgment without process against Debtor, in favor of Creditor for such sum as may appear to be unpaid and owing thereon together with interest, costs and five (5) percent attorney’s fees, with minimum attorney’s fees of Two hundred dollars and no cents ($200.00) and to waive and release all errors which may intervene in such proceeding and consent to immediate execution upon such judgment, hereby ratifying and confirming all that said attorney may do by virtue hereof. Debtor hereby waives the benefit of every statute conferring upon him any right or privilege of exemption, stay of execution, or other relief from the enforcement of a judgment.

1. Be deliberate about your credit policy. Identify high-risk customers, and mitigate that risk wherever possible. Use up-front payments, personal guarantees, co-signors, accrued interest and liens.
2. Start early. Amex sends me an electronic notice 5 days before the payment is due. Below, you’ll find some letters that may help.
3. Memorialize everything. Write a note to the file anytime you speak with a debtor: who, what, when, where, why? Also, send a letter to the debtor after every meaningful conversation. Something like “as we discussed, you agreed to send us $5,000 now and the remaining balance in 30 days.”

Sample letters to your customers:

INITIAL LETTER TO YOUR CUSTOMER

Dear _____:

This letter is a friendly reminder that payment on your account
in the amount of $________ was due on ________.
If you have already sent us your payment, kindly disregard
this letter.   If not, please send us your payment promptly.

Yours truly,

FOLLOW UP LETTER TO YOUR CUSTOMER

Dear _____:

This is our second reminder that payment on your account in
the amount of $________ was due on ________.  We value your
business and hope to keep you as a customer.
However, we do require payment according to the terms of
our invoices. Please send us your payment promptly.

Yours truly,

FINAL LETTER TO YOUR CUSTOMER

Dear _____:

This is our final reminder that payment on your account
in the amount of $________ was due on ________.
If we do not receive payment in full by _____,
we will submit your account for collection.

Yours truly,