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When You Discover Fraudulent Transfers

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I am a Judgment Broker, not a lawyer, and this article is my opinion, please consult with a lawyer if you need legal advice. My opinion about this topic comes from my actual experience, and is limited to California, however the concepts discussed here apply in most places.

Many judgments start when a lawsuit is won, after one entity defrauds another. There are varying degrees and kinds of fraud, including  misrepresenting financial risks, falsifying official documents, and flagrantly stealing money or assets.

Often, when you sue a fraud, the defendant does not answer the lawsuit complaint, and you end up with a default judgment. Scammers like default judgments because they save money and time, there is less chance they will have to pay the judgment, and there is less opportunity for pre-judgment discoveries of fraudulent transfers. 

Many plaintiffs feel lucky when the defendant does not answer the lawsuit complaint, and the plaintiff gets a default judgment.

However, default judgments are harder to domesticate, are more easily vacated or appealed, and are considered the weakest kind of judgment. Often, it is more difficult to recover money from a default judgment.

After your lawsuit is won and the debtor will not pay you, you can find a judgment enforcer or collections lawyer to recover your judgment.

You can also try to enforce your judgment yourself. You may choose to perform post-judgment discovery of the debtor's assets, for example, their bank records.

What if you find a bank funds transfer, right after the debtor had taken your money, to a third party, such as the debtor's spouse, business partner, or their friend? How can you add this newly discovered crooked party to your judgment? Usually you do not, you must start a new lawsuit.

California Civil Procedure Code (CCP) 989 says: "When a judgment is recovered against one or more of several persons, jointly indebted upon an obligation, by proceeding as provided in Section 410.70, those who were not originally served with the summons, and did not appear in the action, may be summoned to appear before the court in which such judgment is entered to show cause why they should not be bound by the judgment, in the same manner as though they had been originally served with the summons."

There is also another lawsuit action to hold parties accountable, other than the named judgment debtor, on a judgment. This is a joint debtor action, and you must serve the party(s) with a SUM-120 and a declaration why they should be responsible for the payment of the judgment. As with any lawsuit, there are a set of rules and requirements for attempting this.

If the fraudulent transfer was obvious and clear-cut, you might be able to toll any statute of limitations under the doctrine of fraudulent concealment (just like delayed discovery under CCP 338(d)). However, if you discovered the fraud, or had reason to investigate the fraud sooner, such a toll attempt will not work. If the fraudulent transfer happened ten or more years ago, you are probably out of luck.

A creditor's lawsuit does not add anyone to the original judgment, it is a new lawsuit against a third party who is in possession of debtor property. You get a new judgment plus interest against the third party, if you prevail in a creditor lawsuit. You can also get a Temporary Restraining Order (TRO) when start your lawsuit. TROs can be an annoying monkey wrench in the works of a party owing money to a judgment debtor.

Proving fraudulent transfers in court is usually difficult. Alter ego and reverse veil piercing is also difficult. Presuming that you have recent evidence of fraudulent money transfers between the bad guys and your debtor, you can try a creditor's lawsuit (CCP 708.210) against the new party.

You are alleging that the new party, holds property or owes a debt, to the debtor. You must assert, provide proof, and try and persuade a judge to agree and sign your new judgment against the new party.

If you can find admissible evidence of any foreign bank accounts in your debtor's name, you can seek a turnover order of those funds per CCP 699.040.

Mark D. Shapiro - Judgment Broker, - where Judgments go to get enforced. JudgmentBuy has the best judgment recovery system, best judgment FAQ and best judgment leads.

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