An auto accident can impact your life in odd ways, and one of them may include possibly being charged with fraud if you sell your home after being served papers for an auto accident lawsuit. Here's more information about this particular issue and what you can do to avoid it.
Risk of Fraudulent Conveyance Accusation
While a personal injury lawsuit generally won't put any legal restraints on what you can do with your house while the case is ongoing, you do risk being accused of fraudulently transferring property to keep those assets out of reach of the plaintiff if you sell or give away your home in an inappropriate way.
The legal term for this is called fraudulent conveyance, and it is most often associated with bankruptcy cases where debtors transfer property to other people to prevent the assets from being sold to repay creditors. However, this type of fraud also happens in cases where defendants transfer assets to intentionally make themselves judgment proof, so plaintiffs won't be able to collect any money if they win their cases.
A home is a very valuable asset that provides the plaintiff with an opportunity to get paid via a lien on the property or other means. If you don't sell your home the right way, the plaintiff could take you back to court and have the transaction voided by proving fraud on your part.
Avoiding Fraudulent Conveyance Charges
Fraudulent conveyance can be challenging to prove, and creditors typically depend on circumstantial evidence to make their cases. Still, it's important to handle the sale or transfer of your home in an appropriate way to avoid being hauled into court again by the plaintiff over this issue.
To avoid being accused of fraud when selling your home, it's critical you sell it for a reasonable price. One of the hallmarks of fraudulent conveyance is assets are typically sold for significantly less than their value. For instance, selling a home with a market value of $200,000 for $100,000 will probably raise red flag unless you have a compelling reason for letting the home go for that amount (e.g. short sale).
Another red flag is selling or giving the property away to an "insider", i.e. family member or close friend. This is because, in a fraudulent conveyance situation, assets are transferred to the insider in name only to keep out of reach of creditors; the debtor will typically still have access to the asset because of this. For instance, you transfer the deed into the name of your mother but still continue to live in the home rent free. That situation could provide the plaintiff with ammunition to have the transfer cancelled. It's best to ensure the home is going to someone of no relation to you.
There are other things you must take into account to avoid landing in court for fraud after selling your home during or after being sued for an auto accident. Consult an attorney for advice about handling this issue.Share
1 June 2017