Most people who owe businesses money make reasonable efforts to fulfill their obligations. They try to work out a payment plan and adjust their budgets so that they can make appropriate payments. They commit to payments until they have repaid what they owe.
Unfortunately, not everyone is as diligent as they should be about fulfilling their financial obligations. In fact, some people take extreme steps to try to avoid financial responsibility. They turn off their phones to avoid collection calls and return mail unopened. They quit jobs when creditors try to garnish their wages. In some cases, they may even intentionally diminish their personal resources.
Creditors trying to seek repayment can hold debtors responsible for diminishing their personal holdings in an effort to avoid financial responsibility. Giving away assets or selling them for less than the fair market value could constitute a fraudulent transfer intended to avoid financial responsibility.
Fraudulent transfers are illegal
Individuals who take on financial responsibility generally need to make a good-faith effort to repay what they owe. If they take on a debt without the intent of paying it as they should, that technically constitutes fraud. So do any financial maneuvers that they complete with the intent of avoiding fiscal responsibility.
Giving a vehicle away to a sibling or parent could constitute a fraudulent transfer. So could transferring a large amount of money to another person. Even the decision to offer a valuable asset for sale at a fraction of its actual resale value could constitute a fraudulent transfer.
Creditors pursuing debt-related litigation can theoretically uncover inappropriate transfers that occurred after the date that someone took on the debt and that could constitute fraud. They may be able to ask the courts to reverse those transfers as a means of holding the debtor accountable for the amount that they owe.
Successful debt-related litigation can help organizations hold people accountable for their financial obligations even if they go to great lengths to try to avoid personal responsibility. Understanding that large transfers could be a way to avoid collection efforts can help creditors take appropriate actions. Litigation may be the best option available in scenarios where people have proven unwilling to fulfill their financial responsibilities as they should.