The civil courts can help businesses dealing with unpaid debts. Litigation offers multiple forms of relief. Creditors can seek liens against valuable property. Those assets then serve as collateral for the debt. They can request judgments and then garnish people’s wages. Creditors can take legal action against other businesses as well as individuals, and there are additional options when a debtor is a company.
In some cases, the party that has failed to fulfill financial obligations may have engaged in inappropriate conduct to avoid financial accountability. In some cases, debtors engage in fraudulent activity as a means of avoiding their responsibility. They might gift, sell or transfer assets to protect them from creditor claims.
Particularly in scenarios where creditors reviewed personal holdings or business resources prior to extending credit offers, it may be easy to identify warning signs of potentially fraudulent transfers. Creditors may be able to pursue civil litigation as a means of challenging fraudulent transfers and holding debtors accountable.
What constitutes a fraudulent transfer?
Parties that have financial obligations to others should attempt to fulfill those obligations in good faith. They should use their income and assets to uphold their financial obligations to creditors. In scenarios where business leaders or individuals transfer money or valuable property to others after taking on responsibility for certain financial obligations, their conduct could constitute a fraudulent transfer.
Attempts to change who owns an asset to protect it from collection efforts are a type of fraud. Vehicles, real property, financial accounts and even business equipment may be subject to fraudulent transfers as individuals or business leaders scramble to avoid financial accountability.
How can the courts help?
State law clearly outlines that fraudulent transfers are illegal and violate the rights of creditors. When creditors can demonstrate that debtors conducted fraudulent transfers to other parties, including individuals, businesses or even trusts, the courts can sometimes reverse those transfers.
They can hold the debtor accountable for attempting to prevent collection efforts by diminishing the resources available to repay creditors. In some cases, the state may even pursue criminal charges against the debtor who conducted fraudulent transfers to avoid financial obligations.
Discussing the circumstances surrounding a debt with a skilled legal team can help business creditors pursue the most effective collection actions. Business litigation can be an effective means of holding a debtor accountable for fraudulent activity and refusing to fulfill their financial obligations to others.