If you think a court rendering a money judgment against another party marks the end of the legal proceedings in a civil case, think again. Unless the losing party pays up right away, which is rare, the winning party is likely looking at a lot more in terms of legal proceedings. One example is the fraudulent transfer claim.
Winning parties in money judgment cases are known as judgment creditors. Losing parties are judgment debtors. There are cases in which debtors seek to protect assets against debt collection by selling or transferring them. Doing so is against the law in most states. For example, transferring the deed to a piece of property to a family member in order to prevent collection efforts would be considered fraud.
Filing a Fraudulent Transfer Claim
The experts at Judgment Collectors, a Utah judgment collection agency based in Salt Lake City, explains that judgment creditors can usually file fraudulent transfer claims with reasonable suspicion the debtors are trying to hide or transfer assets.
The process is pretty straightforward. The creditor or his representative would file a document with the same court that entered the original judgment. The claim would list the asset or assets in question along with a request to void any transactions involving them. A creditor would have to furnish proof of such transactions before the motion is approved.
A successful proceeding is likely to result in the court issuing an injunction that reverses the questionable transactions. This reverts ownership of the assets back to the judgment debtor, opening them up to collection efforts including judgment liens and writs of execution.
Examples of Fraudulent Transactions
There are as many types of fraudulent transactions as there are assets judgment debtors attempt to hide. Here are just a few examples based on real world cases I have researched in the past:
1. Transferring Property to a Former Spouse
One case I ran across involved a judgment debtor who owned a piece of vacation property that was solely in his name. However, his ex-wife was willing to cooperate to protect that property because she still used it from time to time. He simply transferred ownership of the property to her name. In so doing, he thought the property would be protected against collection. He was wrong.
2. Transferring Assets to a Corporation
Another example involves a case in which a debtor transferred certain assets to a limited liability corporation (LLC) he owned in partnership with another business owner. The assets in question were all vehicles. Unfortunately for him, it was fairly easy to prove that he transferred the vehicles solely for the purposes of protecting them against collection. The business to whom they were transferred had no real use for them.
3. Selling Property to Family Members
I once researched a case in which a set of parents sold some of their assets to their children at absurdly low prices. It was clear from the circumstances that the sales were intended only to avoid collection efforts. The court intervened and nullified the transactions, thereby giving the judgment creditor a means to collect.
Debtors Can Be Creative
Debtors can be awfully creative in protecting their assets against collection efforts. Fortunately, the fraudulent transfer claim is a tool creditors can utilize the undo property transactions designed to prevent them from collecting.
If you are a judgment creditor struggling to collect from your debtor, make the time to learn about fraudulent transfer claims and other legal procedures you have at your disposal. There are ways to collect even from the most uncooperative debtors.