People who owe more money than they can reasonably repay sometimes go to great lengths to avoid taking responsibility for their own debts. Sometimes, they will go as far as to quit their job to avoid wage garnishments or get rid of their own property so that creditors can’t claim that property in a civil lawsuit.
If you see the signs of someone intentionally transferring financial resources or significant personal property to family members to avoid paying your company what they owe, can you fight back against that unethical behavior?
Depending on the circumstances, you may be able to challenge the transfer
People who engage in transfers to diminish their personal assets could face consequences for that behavior in multiple circumstances. Sometimes, they transfer assets out of concern that they will soon face creditor lawsuits. Other times, they might intend to file bankruptcy, which could require the liquidation of certain assets to repay their unsecured debts.
Transfers made in the months leading up to bankruptcy can often lead to intense scrutiny by creditors and the courts during a bankruptcy filing. Even outside of the bankruptcy process, financial records that show someone intentionally diminished their own holdings or gave assets away to others could lead to civil lawsuits as well.
Any effort to hide assets from creditors to specifically avoid repaying a debt could also constitute a fraudulent transfer. The more egregious and obvious the fraudulent transfer or gifting activity, the easier it will be for you to hold a debtor accountable for that behavior in court.
What are some signs of fraudulent transfers?
If you finance the purchase of physical property like furniture and designer clothes, only to have none of those assets in the possession of the debtor at the time you take them to court, that could be a major warning sign of fraudulent activity. The same is true if a debtor claims that they no longer have valuable personal property despite having no sales records that show how they liquidated their assets.
When someone can’t account for major assets or purchases, that may demand a closer review of their finances. Understanding your rights as a creditor can help you push back against inappropriate behavior by those who owe you money.