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If a lawsuit goes against the defendant and a judgment is rendered against the defendant, is it a criminal act for the defendant to then start hiding their assets or taking deliberate steps to evade paying the judgment?

For example, let's say a defendant gets sued and the judgment against the defendant is $200,000. The defendant has a house worth about $250,000 and the plaintiff starts executing on the judgment by taking steps to have the house sold to satisfy the judgment. While this action is pending in court, defendant then "sells" his house to his wife for $1 and the deed is transferred into her name.

Can a criminal complaint be lodged against the defendant for this conduct?

  • How is your example any different than failure to pay? Also, it's not clear a defendent is required to sell his house (what if he has no other assets)? – Brandin Nov 25 '17 at 16:11
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    @Brandin: Failure to pay because you don't have the money is one thing. Refusing to pay when you have the money is an obstacle that the plaintiff can overcome. This is making yourself intentionally unable to pay. – gnasher729 Nov 26 '17 at 0:07
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    A transfer to commit fraud on creditors might be rescinded in court as an equitable remedy filed by the creditors. Also, were it a third-party transfer, a quick look at the title would show "lis pendens" attached to the property, as a cloud. – Upnorth Nov 26 '17 at 19:36
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Here's what would likely happen in general: the plaintiff would seek a prejudgment attachment before they even get to trial (here's an example of Civil Procedure Rules outlining prejudgment attachment). Note: there must be a state statute existent in your jurisdiction to even seek this remedy.

Generally, prejudgment attachments start in the form of a writ from the requesting plaintiff. That document must confirm (usually) that there is a suit for damages, ID the property to be attached, etc. Usually they are approved specifically in cases where the defendant is moving property out of the state or is fraudulently getting rid of property or hiding property in order to avoid paying a debt. Some states have different laws respecting if and how much notice a defendant is entitled to receive. Also, the enforcement of such writs must be in line with Due Process requirements - here, that in order to issue a prejudgment attachment while the defendant is unaware of the prejudgment attachment is only constitutional when there are "exigent circumstances."

You tagged Massachusetts, so check here for the relevant Mass. Gen. Laws. Even better, check Mass. R. Civ. P. 4.1 (Attachment) and 4.2 (Trustee Process).

  • There are lots of cases where neither a prejudgment attachment nor a lis pendens are available as remedies, either in law, or because the plaintiff doesn't discover the activity until it has already happened. – ohwilleke Nov 27 '17 at 4:05
  • Indeed. In suggesting pre-judgment attachment, I was assuming one would be aware of and able to identify the property to be attached. When it's transfered unbeknownst to the other party, there are certain measures that can be pursued through the court to yet obtain attachment – A.fm. Nov 27 '17 at 4:11
  • Ah, I see you've covered those other measures below. Thanks, great explanation! – A.fm. Nov 27 '17 at 4:27
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A transfer to commit fraud on creditors might be rescinded in court as an equitable remedy filed by the creditors. Also, were it a third-party transfer, a quick look at the title would show "lis pendens" attached to the property, as a cloud on arm's length alienation of title.

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What you are describing are "fraudulent transfers" which can usually be undone or even subjected to a civil penalty under the Uniform Fraudulent Transfer Act or the equivalent in your state or country, and parallel provisions of the bankruptcy code.

In a nutshell, concealing assets or transferring assets in a manner that renders you insolvent, or is done with an intent to defraud a creditor, is a fraudulent transfer.

Sometimes a fraudulent transfer is a crime and sometimes it is not, something that is evaluated separately from the question of whether it violates UFTA and whether the civil remedies of UFTA are available. In Massachusetts the fraudulent transfer act is codified here.

Criminal liability is fairly context dependent and depends on questions including intent and the precise means by which it is conducted. In practice, criminal cases are very rarely commenced for such conduct, with prosecutors generally preferring to devote their resources elsewhere, but civil remedies for such conduct are not uncommon.

If the judgment debtor files for bankruptcy, a fraudulent transfer action can be brought by the bankruptcy trustee or in certain circumstances in a Chapter 11 reorganization, by a creditor's committee.

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