Once a creditor obtains a judgment, in most jurisdictions they may seize the assets of the debtor. Assets may include wages, real estate or other possessions, and seizing them is a powerful tool for those that hold judgments in order to recoup losses the sustained that led them to obtain the judgment initially. However, debtors often attempt to conceal assets in an effort to protect them from seizure, and have developed a number of ways to hide assets from creditors.
Many times when a debtor learns of pending litigation, they will transfer the title of assets, such as cars and real estate, into the name of a spouse, business partner, or sometimes a business name in an effort to hide the asset from the creditor. If the asset is transferred due to a pending loan default, lawsuit or bankruptcy, they may be guilty of fraud. In those cases, charges may be brought against the creditor and the asset may be seized regardless of whose name is on the title.
Another way that debtors hide assets to avoid judgment collection is by liquidating bank accounts, stocks, bonds or mutual funds and transferring cash to a safe deposit box, or to offshore accounts. In other cases, the cash is used to pay down a mortgage or other bills in an effort to avoid bank account seizure. In some cases, the creditor will make small purchases of items of value, such as jewelry, art or antiques. Often, the purchase will be made in the name of a family member, business partner, or company name, so that the valuable may not be seized as part of the litigation or bankruptcy.
One of the most common ways that debtors hide assets is by transferring real estate, vehicles and bank accounts into a trust account. Although not all transfers of assets into trusts is designed to hide assets, if the transfer was made during litigation or bankruptcy, it may be possible to reverse the transfer and seize the assets. Assets may also be hidden in retirement accounts, such as 401(k) or IRAs, and it is often difficult to reverse those types of transfers.
There are ways to find hidden assets, such as using online searches, asking the court to require the debtor to produce valuables, or hiring a private investigation firm to locate any items that may have been hidden