I am not a lawyer. This is my opinion and a summary of what I have learned and observed. If you need legal advice, contact a lawyer (See our National Lawyer State Bar List).
There are two schools of thought about people who hide their assets, or through careful planning, own nothing. Some think this is evil, and a sign of being a scoundrel. Others think hiding assets is smart. Someone who hides their assets before or during a lawsuit may both be smart and a scoundrel.
Scoundrels like default judgments because they do not have to spend any money and usually very little discovery can be done on them. It is all too common for people or companies (entities) to hide any or all of their assets at the first hint of any legal trouble.
Any kind of asset (that can be seized to satisfy a judgment) can be hidden. Anytime a judgment debtor moves an asset for the purpose of impairing a creditor’s ability to collect, it is a fraudulently hidden asset or a “preferential” transfer.
When starting any asset search, the judgment debtor and those closest to them is the place to start. Obvious connections should not be ignored.
The most common kind of asset hiding is moving assets to the name of a spouse, other relatives, friends (perhaps another scoundrel), business partners, or aliases of the scoundrel debtor’s name (other names and/or social security numbers the debtor uses).
For the rest of this article, NAMES means all the possible aliases, people, or companies the scoundrel debtor may have hidden their assets with.
When a transfer takes place between the debtor and their NAMES and the date is close to the date of a loan default, lawsuit, or bankruptcy; a red flag of suspicion of fraud is raised. However, it is often difficult and expensive to prove fraud fraud in court. One would hope if you cannot collect from the scoundrel, then later on, NAMES defrauds the scoundrel – to make Karma work right.
It is extra hard to collect when a debtor moves assets overseas, to offshore accounts. Certain countries such as the Bahamas, Cayman Islands and Switzerland are known for their protectionist and secretive banking laws. These countries do not recognize claims through courts in other nations. In my opinion, this should be illegal, but that is the way it is.
Most hidden assets are liquid – bank accounts, stocks, bonds, and mutual funds. In most instances liquid assets are transferred into the names or bank safety deposit boxes of NAMES.
Another way scoundrels hide money is by converting it into traveler’s checks, savings bonds, or stockbroker-like accounts. Other tricks are to pay down a mortgage, overpay the IRS, use only reloadable cash cards, or pay down credit card balances.
Another way to hide liquid assets is to buy something valuable and small (to make hiding easy) such as art, or antiques. If you find these, you may be able to sell them with a Sheriff’s sale, if you first persuade a judge to sign a well-written “private place order”
When an asset is not liquid, such as real property, vehicles, boats, planes, etc; scoundrels can hide property by transferring ownership and title to NAMES.
The hardest asset hiding trick to undo is when a scoundrel transfers assets into a trust, such as a living trust, a Multi-Generation Trust, real estate, or offshore trust accounts.
Not every such transfer to a trust is fraudulent. What makes transfers fraudulent is their timing, and the ratio of the transfer, compared to the debtor’s total net worth. If you can prove such a transfer was done in anticipation of, or during litigation or bankruptcy, it may be possible to expensively reverse the transfer.
Another trick available to scoundrels is hiding assets in companies. One way companies shield themselves is to have a registered agent for service be unrelated to the company.
Often corporations list as the registered agent, an attorney who has no actual connection to the owners of the corporation. In my opinion, laws should be changed to make only an officer of a company eligible to be the registered agent for the company.
Other tricks debtors use are to hide assets in retirement plans, which lets scoundrels keep money away from creditors.
How do you find assets and fraudulent transfers? There are four ways:
1) Online searches – if you have a lot of searching to do, it makes sense to sign up for a service, they are easy to find.
2) Mud searches – follow the debtor, see who visits them, look in the trash, etc.
3) Phone and personal searches – call or visit NAMES.
4) Legal requesting documents – bring NAMES to court to produce any documents that involve the debtor in any way. “Leave no stone unturned.”
Who can do this?
1) You – yourself, if you are motivated and have the time and money.
2) You – you do the planning, and hire Private Investigators and lawyers.
3) A Judgment Enforcer or a collection agency or lawyer – outsourcing the planning and work involved. Note that most judgment experts want proof of the assets on a large judgment to be willing to attempt to undo fraudulent transfers.