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socrateaser
socrateaser, Attorney
Category: Bankruptcy Law
Satisfied Customers: 33490
Experience:  Attorney and Real Estate Broker -- Retired (mostly)
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Hello, I asked you a question on 2/2/2013 in category of

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Hello,
I asked you a question on 2/2/2013 in category of bankruptcy law. This question is somehow related. But I will brief a bit on the background.
The plaintiff expects to get a default judgement soon. The defendant is complained on breach of contract and fraud (income). The defendant has the assets below:
1) his residential home under a trust of his own;
2) two busienss entities which also owns real-estates where the businesses operating. One business is jointly owned with another person. Defendant owns the business entites by owning the stocks.
3) defendant's IRA or other retirement account. Most likely at least partially funded by money from fraudulent performance or breach of contract.
4) possible bank accounts;
Question: upon getting the judgement, can the plaintiff immediately put
Lis pendens on the real-estates in 1) and 2) at the county where the real-estate locates. Does this action subject defendant's lawsuit on slander of title?
Can the judgement be used to immediately garnish defendant's bank account which may be under the name of a corporation owned by defendant, as well as the business entities assets?
The plaintiff complained defendant's fraud as well. But the judgement amount (asked) does not include punitive amount yet. However, the defendant engaged in similar fraud in his other business, it is high likely his IRA or other retirement account were funded with fraudulent money. If so, can the judge (the same judge)
determine whether to pursue defendant's IRA or not? Or the plaintiff has to file a seperate motion/request for this? Can the defendant file for bankruptcy protection after judgement is out and taking his asset? If the defendant truely has asset, can he file for bankruptcy protection?
Submitted: 1 year ago.
Category: Bankruptcy Law
Expert:  socrateaser replied 1 year ago.
Hello -- you ask:

Question: upon getting the judgement, can the plaintiff immediately put Lis pendens on the real-estates in 1) and 2) at the county where the real-estate locates. Does this action subject defendant's lawsuit on slander of title?

A: A lis pendens is used to provide notice to the world that certain real property title is at issue in a "pending" legal action. Once judgment is given, the means of providing notice is to record an "abstract of judgment" with the deed registrar/clerk/court wherein the property of the defendant is located. So, the answer here is that the question is inapplicable to the contemplated circumstances.

Can the judgement be used to immediately garnish defendant's bank account which may be under the name of a corporation owned by defendant, as well as the business entities assets?

A: A corporate account cannot be accessed to satisfy a personal debt of a shareholder. The judgment creditor (plaintiff) would have to have the sheriff seize the corporation's shares and sell them to satisfy the debt. Alternatively, the judgment creditor could ask the court to issue a turnover order to force the judgment debtor (defendant) to turnover the shares.

The plaintiff complained defendant's fraud as well. But the judgement amount (asked) does not include punitive amount yet. However, the defendant engaged in similar fraud in his other business, it is high likely his IRA or other retirement account were funded with fraudulent money. If so, can the judge (the same judge) determine whether to pursue defendant's IRA or not?

A: The judgment creditor would have had to sue the corporation to recover any fraudulently transferred funds. If the judgment debtor effected a fraudulent transfer, then the judgment creditor should have added a count to the original lawsuit to recover the fraudulent transfer. It may now be barred by the doctrine of res judicata, which would make any attempt at recovery against the corporation or the judgment debtor's transferred funds unavailable.

Or the plaintiff has to file a seperate motion/request for this?

A: Separate lawsuit.

Can the defendant file for bankruptcy protection after judgement is out and taking his asset?

A: Yes, but if the judgment finds and concludes that a fraud has occurred, then the judgment creditor can have the bankruptcy court declare the judgment nondischargeable, so that it will survive the bankruptcy. An ordinary breach of contract claim would be discharged in bankruptcy.

If the defendant truely has asset, can he file for bankruptcy protection?


A: Yes, but once again, the bankruptcy court can hold a provable fraudulent transfer nondischargeable.

Hope this helps.
socrateaser, Attorney
Category: Bankruptcy Law
Satisfied Customers: 33490
Experience: Attorney and Real Estate Broker -- Retired (mostly)
socrateaser and 2 other Bankruptcy Law Specialists are ready to help you
Customer: replied 1 year ago.

Thanks. I just want to confirm my understand here.


1) instead of lis pendens, the plaintiff can record an "abstract of judgment" with the deed registrar/clerk/court wherein the property of the defendant is located. Here since the property is either under a trust or under a corporation ownership, can the judgement (assuming against defendant)


be used for such an record?


2) regarding forcing the defendant to turn over the shares, how long it takes? Can the court do it quickly, or it is quicker to use sheriff? Can the defendant challenge (appeal or ..) this even if the judgement is a default judgement? After that does the plaintiff owns the business entity (with the real-estate) or have the right to sell them to satisfy the debt?


3) The plaintiff filed complaint based on two charges a) breach of contract; and b) fraud. Now I assume the default judgement contains fraud. As a result, I assume defendant's debt (owned to plaintiff) cannot be discharged throught bankruptcy. Furthermore, can the plaintiff ask the court to seize defendant's IRA or other retirement assets because these account may be funded from fraudulent money (even not from the fraud charged in this lawsuit)?


4) Finally, is it worth to hire a collection agency or other service to search and collect? I assume this could be done on commission basis?

Expert:  socrateaser replied 1 year ago.
1) instead of lis pendens, the plaintiff can record an "abstract of judgment" with the deed registrar/clerk/court wherein the property of the defendant is located. Here since the property is either under a trust or under a corporation ownership, can the judgement (assuming against defendant) be used for such an record?

A: The recorded abstract of judgment creates a lien against the defendant's property real property. It does not create a lien against property owned by a trust or corporation.

2) regarding forcing the defendant to turn over the shares, how long it takes? Can the court do it quickly, or it is quicker to use sheriff?


A: The sheriff is usually the first step -- sheriff is instructed to levy against the securities via a writ of execution and then sell them at public auction.

 

Can the defendant challenge (appeal or ..) this even if the judgement is a default judgement?


A: Yes.


After that does the plaintiff owns the business entity (with the real-estate) or have the right to sell them to satisfy the debt?

 

A: The sheriff would generally auction the securities, and anyone can bid. The goal for the judgment creditor is to recover the value of the judgment. The judgment creditor can bid at the sale, and potentially purchase the shares at far below the value of the underlying property. At which point the creditor could sell that property and recover its value.


3) The plaintiff filed complaint based on two charges a) breach of contract; and b) fraud. Now I assume the default judgement contains fraud. As a result, I assume defendant's debt (owned to plaintiff) cannot be discharged throught bankruptcy. Furthermore, can the plaintiff ask the court to seize defendant's IRA or other retirement assets because these account may be funded from fraudulent money (even not from the fraud charged in this lawsuit)?

 

A: If the plaintiff's judgment expressly voids the transfer of funds to the IRA, then the plaintiff would be unable to reach funds in a retirement account.


4) Finally, is it worth to hire a collection agency or other service to search and collect? I assume this could be done on commission basis?

 

A: I believe that you will have to hire an attorney to collect this debt for you, because the assets are apparently held by third parties which were not joined in the original action.

 

Hope this helps.

socrateaser, Attorney
Category: Bankruptcy Law
Satisfied Customers: 33490
Experience: Attorney and Real Estate Broker -- Retired (mostly)
socrateaser and 2 other Bankruptcy Law Specialists are ready to help you
Customer: replied 1 year ago.

Thanks. Just a couple of final clearification.


1) since the real-estates are either under trust or corporation, the plaintiff cannot put a lien because the judgement is against the defendant.


2)


If the defendant appeals, will the sheriff has to hold the process of seizing the defendant's stocks?


3) If the judgement does not mention " voids the transfer of funds to the IRA


etc", the plaintiff can investigate or garnish IRA(?) if no other non-IRA assets are collectible.


4) Is attorney willing to work on commission basis?

Expert:  socrateaser replied 1 year ago.
1) since the real-estates are either under trust or corporation, the plaintiff cannot put a lien because the judgement is against the defendant.

A: Correct.

2) If the defendant appeals, will the sheriff has to hold the process of seizing the defendant's stocks?

 

A: The defendant would have to file a "supersedeas bond," which is an insurance certificate that will pay the judgment, in the event that the appeal fails. Otherwise, the sheriff's seizure of the defendant's securities would proceed while the matter was on appeal.

 

3) If the judgement does not mention " voids the transfer of funds to the IRA, etc", the plaintiff can investigate or garnish IRA(?) if no other non-IRA assets are collectible.

 

A: An IRA is not subject to execution, absent an order of the court finding that a fraudulent transfer occurred. Unless the plaintiff actually sued on the basis of a fraudulent transfer, the IRA would be unreachable.

 

4) Is attorney willing to work on commission basis?

 

A: It's legally permissible. You would have to negotiate with the attorney.

 

Hope this helps.

socrateaser, Attorney
Category: Bankruptcy Law
Satisfied Customers: 33490
Experience: Attorney and Real Estate Broker -- Retired (mostly)
socrateaser and 2 other Bankruptcy Law Specialists are ready to help you
Customer: replied 1 year ago.

2) to appeal, the defendant actually has to come up with the money for the bond.

With the judgement, can the plaintiff go to defendant's bank to immediately freeze and garnish his personal account or acount jointly owned by the defendant?

 

3) At the moment (without looking at how defendant's IRA was funded), the plaintiff can only suspect a) the defendant's contribution to IRA was

(at least) partially funded from fraud money; and or b) the defendant transferred some amt into IRA or other retirement to avoid judgment

creditor. I guess the plaintiff's only option is to file another lawsuit. If so, does the plaintiff has to go through all the legal complaint process from scratch (i.e. file initial complaint, serve notice, speical bailiff etc), or the plaintiff can just add a motion. Does either a) or b) give enough reason to garnish IRA if proves to be true?

Expert:  socrateaser replied 1 year ago.

2) to appeal, the defendant actually has to come up with the money for the bond. With the judgment, can the plaintiff go to defendant's bank to immediately freeze and garnish his personal account or account jointly owned by the defendant?

 

A: Yes.

 

3) At the moment (without looking at how defendant's IRA was funded), the plaintiff can only suspect a) the defendant's contribution to IRA was

(at least) partially funded from fraud money; and or b) the defendant transferred some amt into IRA or other retirement to avoid judgment

creditor. I guess the plaintiff's only option is to file another lawsuit. If so, does the plaintiff has to go through all the legal complaint process from scratch (i.e. file initial complaint, serve notice, special bailiff etc), or the plaintiff can just add a motion. Does either a) or b) give enough reason to garnish IRA if proves to be true?

 

A: See K.R.S. 378.030, K.R.S. 378.070.

 

Re is it enough, yes -- that's the whole purpose of a lawsuit based upon a fraudulent transfer.

 

Hope this helps.

 

Note: You've asked a lot of follow-up questions. I would greatly appreciate it if you would give me a positive rating for more than one of my answers here. Thanks for your understanding.

Customer: replied 1 year ago.

I made a couple of ratings to your answers on this Question/Answer chain.


Sorry for the length follow up. If you prefer I start new question on each follow, please let me know. Otherwise, I will rate your answer like I did.


 


I just have to clarify the two things below.


With the judgement in hand can the plantiff legally find out all the business entities/trust (owned by defendant) together with the assets under them? If not, will the sheriff do so? If bank account is not directly owned by the defendant but through a corporation/trust, I assume the sheriff can freeze the account and give the balance in the account to plaintiff to satisfy the debt collection. Does the sheriff have to give defendant advance notice or the sheriff can go to bank to suddendly freeze the account (for liquid assets).


 


For IRA, I am still confused. My understanding is that the plaintiff has to file a completely new petition (i.e going through notice service etc) to even be able to figure out whether the IRA is funded by fraud money.


 

Expert:  socrateaser replied 1 year ago.
With the judgment in hand can the plaintiff legally find out all the business entities/trust (owned by defendant) together with the assets under them?

A: The plaintiff can use and enforce any discovery tool which would have been available at trial to obtain information about the location and amount of assets. KY R. Civ. Proc. 69.03. This would include a subpoena issue to the corporations and IRA custodians to produce records concerning the judgment debtor's (defendant's) assets.

If not, will the sheriff do so?

A: Sheriff won't look for anything. Plaintiff must direct sheriff to the precise location of assets for execution.

If bank account is not directly owned by the defendant but through a corporation/trust, I assume the sheriff can freeze the account and give the balance in the account to plaintiff to satisfy the debt collection. Does the sheriff have to give defendant advance notice or the sheriff can go to bank to suddenly freeze the account (for liquid assets).


A: The sheriff can only reach the accounts of the defendant. If there are third parties that hold property of defendant, then the plaintiff must petition the court and prove a fraudulent conveyance, as described in my previous answer.

For IRA, I am still confused. My understanding is that the plaintiff has to file a completely new petition (i.e going through notice service etc) to even be able to figure out whether the IRA is funded by fraud money.

 

A: The plaintiff can subpoena the IRA custodian for account information. However, the plaintiff cannot reach the account assets without petitioning the court and proving a fraudulent conveyance. So, there is little point in subpoenaing the IRA outside of the legal process to prove the fraudulent conveyance, because without a finding of fraudulent conveyance, the plaintiff cannot reach the IRA funds.

 

Hope this helps.

Customer: replied 1 year ago.

Is the IRA custodian usually the defendant himself or the bank/mutual fund managment who administrating the IRA? Since defendant is owner of the corporation, does subpoena the corporation the same as subpoena defendant? If that is true, given the defendant is not corporating (i.e. avoid court service), how can the plaintiff get IRA and corporation information?

Expert:  socrateaser replied 1 year ago.
Is the IRA custodian usually the defendant himself or the bank/mutual fund management who administrating the IRA?

A: The custodian is the investment firm or bank that holds the account. The account owner is considered the trustee of the account. The trustee can be required to produce information concerning the account. However, IRA accounts are exempt from execution for debt -- unless you first prove that a fraudulent conveyance took place -- or, the deposit into the IRA took place within 120 days of the date that judgment was entered in the case where the plaintiff's right to payment is awarded. K.R.S. 427.150.


Since defendant is owner of the corporation, does subpoena the corporation the same as subpoena defendant?

A: No. However, if defendant is the sole owner of the corporation, then the seizure and sale of corporate securities would operate to transfer all of the corporate assets from the defendant to a new buyer, and the proceeds of sale would go to the plaintiff. So, as a practical matter, it's probably unnecessary to subpoena the owner in his capacity as the President of the Corporation, because as defendant, he would have to identify the location of the securities so that they could be seized by the sheriff and sold.

If that is true, given the defendant is not corporating (i.e. avoid court service), how can the plaintiff get IRA and corporation information?

A: In IRA is a personal asset. It has no corporate existence. So, it's unnecessary to reach the corporation. As for corporation info, plaintiff would subpoena the owner in his capacity as President or CEO of the corporation.

Hope this helps.
socrateaser, Attorney
Category: Bankruptcy Law
Satisfied Customers: 33490
Experience: Attorney and Real Estate Broker -- Retired (mostly)
socrateaser and 2 other Bankruptcy Law Specialists are ready to help you

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