What Can Be Done If A Debtor Is Fraudulently Disposing Of Assets As We Are Attempting To Collect?
If a debtor allegedly planning to transfer assets or proven to be disposing of assets, a creditor should retain counsel to promptly file a lawsuit. If a lawsuit is active, emergent relief by way of order to show cause can be sought by seeking injunctive relief to prohibit transfers of certain assets by an insolvent debtor. This remedy is extraordinary relief that must be established based upon factors in a test applied by the courts including a requirement to prove a reasonable probability of success on the merits.
Also, a remedy which is rarely granted, but in unique circumstances is available to creditors, is to seek a prejudgment attachment against an asset. A prejudgment attachment can be obtained when the creditor might have verified information about a valuable asset that a debtor has undertaken action to transfer. These proceedings are a valid exercise of creditor’s rights if there is credible and verifiable evidence that a debtor is planning to fraudulently transfer an asset outside the reach of creditors.
Would The Court Ever Discharge A Creditor’s Judgment?
Under a chapter 13 or chapter 7 filing, when a judgment of a creditor impairs the value of the debtor’s federal exemptions under 11 U.S.C. 522 of the Bankruptcy Code, then by motion, a debtor can seek to have the judgment discharged as a lien of record. In a chapter 7 case, the most common scenario is when a judgment creditor has a large judgment against a debtor. In New Jersey, applying a formula based on the aggregate value of all mortgages and other liens, if the value of those other liens and the judgment result in a mathematical calculation there is no equity for the debtor’s exemption (a joint case would be $25,000 per debt or $50,000), then that judgment would impair the debtor’s right to assert the exemption and it can be avoided and discharged as a lien of record.
In a chapter 13 case, a monetary judgment can be discharged at the end of the five-year plan by filing a motion with the court indicating that the creditor has received all the payments as required under the plan, and the judgment lien should be discharged.
My Debtor Filed Bankruptcy, What Can I Do?
If your debtor filed for bankruptcy, the first task is to promptly review the Notice of Case Commencement, which sets forth and explains certain deadlines for filing a proof of claim to establish that your claim is timely filed to be eligible to be paid a distribution in the case Also, look for a date set for the creditors’ meeting that is conducted by a trustee with creditors are invited to attend and are permitted limited time to ask questions of a debtor. Bankruptcy notices can be confusing. The most important thing you can do is after receiving a notice is to not let it sit on your desk unattended. Not responding to deadlines has consequences. For instance, there are strict deadlines in a chapter 7 case to file a non-dischargeability complaint for certain claims within 60 days from the first schedule date of the creditors’ meeting. If a creditor is inattentive to the deadlines and can support a claim for fraudulent conduct by the debtor, that claim will be discharged. If you don’t understand the notice, seek advice of counsel.
If A Creditor Was Not Listed In The Bankruptcy As A Creditor And Didn’t Receive Notice, Can They Still Recover?
If a creditor was not listed on the Bankruptcy Petition, and the creditor becomes aware of the bankruptcy, the response depends upon when actual knowledge of the case filing is received by the creditor. The strict Bankruptcy Code and Rules provide that a debtor will not receive a discharge of an unlisted debt. However, the case law, interpreting these rules and the statute, provides that there are more limited circumstances in which a creditor’s claim would not be discharged. In the Third Circuit, that is precedential authority in New Jersey cases, a decision Judd v. Wolfe applies. In that case, a creditor who was not listed, but became aware of bankruptcy well after the case filing, the debtor still obtained a discharge of that debt since the case was “a no asset”, “no bar date” case.
The basis for the courts holding was that no meaningful objective would be served by requiring a debtor to reopen the case where there were not any assets to be administered by a Trustee. However, if a creditor has a potential fraud claim, or a claim for willful or malicious injury, the “no asset”, “no bar date,” that essentially excuses the debtor from amending the petition and reopening the case, would not apply. One thing a creditor should always consider is that once they receive actual knowledge of the bankruptcy, they have a duty to investigate the circumstances and take further action. While a debtor may incorrectly list a creditor’s mailing address if the creditor with actual knowledge of the bankruptcy will still be bound by the automatic stay preventing pursuit of the claim without obtaining relief to continue their case by filing a motion for relief from the automatic stay.
As A Creditor, What Can We Do If We Can No Longer Locate A Debtor Who Is Ordered To Pay A Judgment?
It’s not unusual for debtors to simply go out of business, or for individual debtors to move across the country and become difficult to track down. In the internet age, is helpful to have relevant and complete names and other personal identifying information so a creditor can conduct their own search. Or, if those efforts are futile, there are many public services. They’re known as skip tracing services who can find businesses or people after they seemingly have disappeared. A judgment of one state court can be pursued in another jurisdiction and depending on the new state’s procedures for recognition of the judgment, once followed in what is usually a streamlined process execution efforts can continue in the defendant’s new location.
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