The San Diego County Superior Court entered a default judgment against a local business owner and his company. The debtor got the notice of entry of judgment in the mail, and he knew exactly what he was looking at. He called the creditor’s lawyer and left a voicemail asking to talk about “stuff you sent to me in the mail.” That recording would matter later, because the voicemail proved he knew about the judgment.
Then he got busy.
Years before, the debtor’s parents had signed their house over to their two sons, with a catch: the parents kept the right to live there for the rest of their lives. In legal terms, the parents kept a life estate. They could live in the house, but they couldn’t leave the house to anyone else when they died. The sons got what’s called a remainder interest: the right to own the house outright once both parents passed away. Until then, the sons couldn’t move in or kick their parents out, but the house was already legally theirs, waiting in line. A remainder interest is real property, and real property has real value.
The deed made the two brothers tenants in common. That means each brother owned his own separate share of the house, 50% each since the deed didn’t say otherwise. Each brother could sell, give away, or borrow against his own half without asking the other. The debtor’s 50% remainder interest was his only real estate, and his half carried tens of thousands of dollars in equity. That was more than enough to pay the judgment.
Within weeks of that voicemail, the debtor signed a quitclaim deed handing his half of the house to his little brother. No money changed hands. Just a “gift.”
His share of that house was the only thing he owned worth going after, and he knew it. You can practically hear the thinking behind this move: “I’ll just give my half to my brother. Nothing’s in my name anymore. Good luck collecting, suckers!”
But we’re not suckers, and we weren’t going to let him get away with that.
Once the quitclaim deed hit the county records, the debtor’s name disappeared from the title. A property search would now come up empty: no real estate, nothing to lien, no payday for the creditor. And because his half went to his own brother instead of a stranger, the debtor wasn’t really losing anything. He could count on getting his share back down the road, whether the brother quietly deeded the half back once the heat was off, or split the money with him after their parents passed.
That’s a fraudulent transfer in a nutshell: dump an asset on a friendly relative so the creditor can’t touch the asset, while keeping the asset close enough to get back later.
After we bought the judgment, we pulled the property records, and the timeline jumped off the page:
Under California’s Uniform Voidable Transactions Act (Civil Code § 3439 and following), those are exactly the “badges of fraud” courts look at. A court can set aside a transfer like this one, and California law lets a judgment lien reach a remainder interest just like any other interest in real estate.
So we did three things:
The “gift” plan had one big flaw: it dragged the little brother into the mess. Until now, the judgment had been the debtor’s problem. Once we served the lawsuit, the brother was a named defendant in his own right, facing a fraud claim, possible punitive damages, and a court fight over the family home where his parents were still living.
The brother wanted no part of a lawsuit. He told the debtor to quietly “take care of this.”
That forced the debtor to the table. With his own brother leaning on him and his scheme about to unravel in court, he promptly paid the judgment in full.
Handing your assets to a family member works great until the family member gets named in the lawsuit too.
Debtors move assets to spouses, siblings, parents and new LLCs all the time, usually right after a lawsuit is filed or a judgment is entered. A transfer like that isn’t always a dead end. The law gives creditors a way to go after the asset and the person who received it.
But going after a fraudulent transfer means filing a brand-new lawsuit. That brings new filing fees, service costs, and court appearances, and possibly discovery, motions, and a trial. Attorney’s fees can pile up quickly, and the case can take months or years to resolve, with no guarantee the debtor or the relative pays at the end. For many creditors, chasing a fraudulent transfer can cost more time and money than the judgment is worth.
That’s where we come in. We take on that cost and risk ourselves.
Final Verdict Solutions buys civil money judgments over $25,000 in all 50 states. If you’re holding a judgment and the debtor seems to have made their assets disappear, contact us for a no obligation cash offer. If you accept, you get paid and the fight becomes ours.
Final Verdict Solutions buys civil money judgments over $25,000. Get a no-obligation cash offer. If you accept, you get paid and collecting the judgment becomes our job, not yours.
2001 Market Street, Suite 2500
Philadelphia, PA 19103
