Can you transfer assets to avoid losing them in a lawsuit?
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Can you transfer assets to avoid losing them in a lawsuit?
And if not, what can happen to the person who all of the assets were transferred to?
Asked on January 23, 2019 under Bankruptcy Law, Pennsylvania
Answers:
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 5 years ago | Contributor
Not once you know a lawsuit is likely (or has in fact been filed): once you are aware of potential debt or liability, including from being sued, transferring assets to hide them from creditors or plaintiffs is considered a transfer made to defraud those creditors, etc. by denying them recourse to your assets and, as such, may be set aside or reversed under the Uniform Fraudulent Transfers Act, a version of which has been implemented in every state.
The recipient would only lose the assets if he/she did not know that they were being transferred to avoid creditors or a lawsuit. If he or she did know and therefore knowingly participated in the scheme, if this action ends up costing the creditor or plaintiff money, they could potentially sue the recipient for their losses.
Note: assets may be sold for their fair market value, since in that case, the money for them is available to the creditor, etc.--there was no fraud.
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