What to do when someone tries to hide their money to avoid paying your judgment
Fraudulent conveyance occurs when someone illegally transfers assets to avoid paying a debt or legal judgment — including in personal injury lawsuits. This tactic can prevent injured plaintiffs from collecting compensation they’re rightfully owed. Fortunately, the law offers remedies to reverse these transfers, recover the value of the assets, and hold all responsible parties accountable.
You’re a victim of an accident who suffered a personal injury. You finally reached a resolution with the defendant—a settlement or verdict of enough money to cover your costs associated with the injury and recovery.
Time to celebrate?
Maybe, but not necessarily. Being a successful or “winning” plaintiff in a lawsuit is really only the first step, because the outcome is only as valuable as being able to actually receive the money to which you’re entitled.
One thing your lawyer likely did after your initial consultation was to investigate whether the defendant has money. If the person was impoverished, had no assets, or would have no way to pay a judgment, the lawyer might have declined to take the case. You can’t squeeze blood from a stone, as they say. If the defendant has no money, then there’s nothing to pay if they lose the lawsuit.
But what if the defendant did have money, and now it appears they no longer do?
Some defendants try to dodge payment by hiding their assets, which is called fraudulent conveyance.
What is fraudulent conveyance?
A fraudulent conveyance (also called fraudulent transfer) occurs when someone intentionally moves, hides, or gives away assets to avoid paying a legal judgment or debt. This might include transferring property to a family member, creating fake debt to “repay,” or moving funds to another account. Fraudulent transfers can be made before or after a lawsuit is filed, but their key purpose is to prevent a creditor or plaintiff from collecting on a valid claim.
How do defendants transfer assets? A defendant might try to sidestep their obligation to pay a settlement or judgment by transferring their assets to a family member, friend, or shell company.
This isn’t just shady money-handling; it’s a civil wrong that can be undone by the courts.
There are two types of fraudulent conveyance:
- Actual fraud, when the transfer is made with the intent to hinder, delay, or defraud a creditor. In determining whether actual fraud took place, the court will likely consider factors that include:
- Whether the transfer was to a close friend or insider;
- Whether the defendant retained control over the asset;
- Whether the transfer was initiated after the lawsuit was filed; and
- Whether the transfer was for less than fair market value.
- Constructive fraud, when the transfer wasn’t intentional but was made without receiving fair value in return, which leaves the defendant (transferor) insolvent or nearly insolvent. This focuses on the effect of the transfer, rather than the intent. The court would question:
- Was the defendant insolvent at the time, or as a result of the transfer; and
- Did the defendant receive a fair equivalent in value for what they transferred?
For example, a defendant in a serious car accident lawsuit suddenly transfers ownership of his home to his sister in exchange for $1. The court might find this to be a fraudulent conveyance and reverse the transaction.
What laws govern fraudulent conveyances?
Most states follow either the Uniform Fraudulent Transfer Act (UFTA) or the newer version, which is the Uniform Voidable Transactions Act (UVTA).
Under these laws, courts may:
- Void fraudulent transfers, which would return the assets to the debtor’s possession or estate;
- Attach property or impose liens; or
- Award money damages that compensate the plaintiff for losses resulting from the fraudulent transfer.
Fraudulent transfers aren’t limited to homes or cars. Sometimes they include hidden cash transfer, cryptocurrency holdings, business interests or LLCs, lavish “gifts”, or changes to retirement accounts or trusts.
In extreme cases, courts may appoint a receiver to manage the debtor’s assets, collect rents or business income, and ensure those funds are applied to the judgment. This is rare but powerful.
Why this is important for plaintiffs
A court judgment is only as good as a plaintiff’s ability to collect on it. If the at-fault party claims they have no money, but secretly transferred a vacation home to a relative or moved cash to an offshore account, the claim could be left unpaid. Then, the plaintiff has spent time and money on legal fees and court costs, and other expenses related to the lawsuit, and they receive nothing in return—they’re actually in worse financial condition than if they’d never filed the lawsuit in the first place.
Fraudulent conveyance is particularly common in cases involving high-value verdicts, sole proprietors or small business owners, or defendants with significant personal wealth.
Are there “red flags” that might suggest intend to defraud? Courts consider these indicators of intent to defraud:
- Transfer to a close family member
- Transfer made after being sued or just before
- Lack of adequate payment for the asset
- Defendant retaining use/control of the asset
- Concealment of the transaction
The more of these factors are present, the more likely the court will find fraud.
What can a plaintiff do to recover damages?
If a fraudulent conveyance has taken place, a plaintiff who is owed money still has several legal tools available to recover compensation.
Statute of limitations for fraudulent conveyance lawsuit
In most states, the plaintiff has between four and seven years from the date of the fraudulent transfer to file a lawsuit to challenge it. Some states provide an extended timeline if the fraud was concealed and discovered later. However, the legal system can move slowly—it’s important that if a plaintiff or their lawyer suspect fraudulent conveyance, they act quickly to investigate. Again, the time allowed to do this varies by state so it’s important to know the state law where the lawsuit would be filed.
Post-judgment discovery
You can ask the court for the defendant’s financial documents. The court can issue a subpoena to their banks or employers, or to retrieve property records. Your lawyer can then look for patterns of suspicious transfers or “gifts.”
Fraudulent transfer action
The plaintiff may file a second lawsuit against the defendant, this time suing both the defendant and the party who received the transferred asset. The plaintiff may ask the court to reverse the transfer and return the property or its value. Sometimes, the transferee (person who received the property) is liable for the amount owed.
The defendant isn’t the only person who is liable for a fraudulent transfer. If a person who receives a fraudulent transfer knew or should’ve known that it was fraudulent, they can be liable. This could include a spouse, business partner, or friend of the defendant.
If the defendant is found liable for a fraudulent conveyance, insurance won’t cover those acts. The money must come directly from the responsible parties, making recovery dependent on effective asset tracing and legal action.
Pre-judgment remedies
If the plaintiff or their lawyer detects suspicious activity early in the proceedings, they may ask for a preliminary injunction, which would freeze their assets pending the lawsuit’s outcome. The court could also grant a writ of attachment to secure the property before a judgment is issued. This would preserve the property or its value until the lawsuit reaches its result.
Court-enforced collection
The court has methods for collecting assets. It can garnish wages, levy bank accounts, or place liens on real property.
Can the defendant still avoid paying?
There are defenses a defendant or transferree might try to argue. These include:
- The transfer was made in good faith and for reasonably equivalent value;
- The debtor was not insolvent at the time of the transfer;
- The transaction was routine or unrelated to the pending lawsuit.
The court would weigh these considerations along with the facts and make a determination about whether the transfer constituted a fraudulent conveyance.
If you’ve won a personal injury lawsuit and believe the defendant is hiding assets, don’t give up. The law provides powerful remedies to help ensure you aren’t left with an empty judgment. With the help of a skilled attorney, you can investigate, expose, and reverse fraudulent transfers, ensuring justice is served—not just in theory, but in practice.
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