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Debtors Cannot Gift Assets Out Of Reach Of Creditors

On Behalf of | Mar 26, 2009 | Litigation

Perhaps someone owes you money who at one point seemed to have a lot of assets but now has little or none. While it is possible that person because of dire financial straits legitimately had to sell off those assets, it is also conceivable that some of those assets were transferred to others for less than reasonably equivalent value. If that is the case, New Hampshire, like most states, has a Uniform Fraudulent Transfer Act that allows creditors to undo the transfer of the asset, to the extent consideration for the transfer was less than the value of that asset.

By way of example, assume you are owed $50,000 from an individual who used to have a vacation home on Lake Winnipesaukee and claims he had to sell it to his brother-in-law and no longer owns it. You hire a lawyer who determines that the vacation home was worth $300,000 but that in fact it was transferred to the brother-in-law who took over the mortgage payments on a mortgage of only $200,000. Therefore, there was $100,000 of equity in the vacation home transferred to the brother-in-law. If it can be shown that the individual who owed you money was insolvent or that the transfer made him insolvent, you will not only have a claim against him but a claim against his brother-in-law for the $50,000 owed. You could seek, and may very well obtain, a lien for your $50,000 on the brother-in-law’s vacation home thereby substantially increasing the chance that you will be repaid.

There are certain specific requirements for such actions and you should seek legal counsel to determine your rights and strategy in moving forward with such a claim. You should keep in mind that under such circumstances not only is the person that owes you money liable to you but also others who have received good deals or gifts on transfers of his assets may, likewise, be partially liable.

J. Daniel Marr is a Director and Shareholder at Hamblett & Kerrigan, P.A. His legal practice includes counseling businesses and individuals on a variety of legal issues and advocating on their behalf. Attorney Marr is licensed and practices in both New Hampshire and Massachusetts. Attorney Marr can be reached at [email protected].