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Saturday, December 8, 2012

Fraud And Lis Pendens

A Lis Pendens is a powerful legal document that is sometimes filed when there is a pending lawsuit involving real estate ownership claims. This article is my opinion, and not legal advice. I am a judgment broker, and am not a lawyer. If you ever need any legal advice or a strategy to use, please contact a lawyer.

When there is evidence that a judgment debtor's real estate property has recently been fraudulently transferred, the judgment creditor may decide to file a third-party fraudulent transfer lawsuit, to attempt to set aside that transfer. After such a lawsuit gets served, some creditors (or more likely their attorneys) file and record a Lis Pendens document with the county recorder. In most states and situations, such a recording will temporarily cloud the title for that property, which should prevent it from being sold.

Not every suspected fraudulent transfer can be proven in court to be a fraudulent transfer. If the judgment debtor's property was already sold in a good faith sale, with full consideration paid; that sale is not going to be judged a fraudulent transfer. Tracing where the money from that kind of legitimate judgment debtor sale went, might be useful to a creditor.

Because of ownership possibilities and laws, sometimes recording a Lis Pendens does not tie up the property. Before you start to get and record a Lis Pendens, order a copy of the Grant Deed; and check how the property is held, and by whom. Get a certified copy of trust deeds and anything else that shows any property ownership changes.

Armed with the right knowledge and proof, if you find any funny business that points to fraudulent transfer(s); you will know better which party you might decide to sue with a third-party creditor's fraudulent transfer lawsuit. If you win such a lawsuit, it might make sense to force a sale of the property. Keep the 90-day bankruptcy preference period in mind.

Certain monkey business is sometimes legal, or requires a lawsuit to attempt to undo. Much depends on how the debtors and non-debtors hold title to the property. In most states, title held in "joint tenancy" or something similar, means that when two parties hold title, each party owns one half of the property. In that case, you can lien your judgment debtor's interest in the property. If they sell that property, and if your lien is recorded correctly, in most states and situations, the title company should find you.

Sometimes, judgment debtors take title to their property as "tenants by the entirety". In that case, the property ownership cannot be divided because each person owns 100% of the property, which is bad news for creditors. Some judgment debtors switch from joint tenancy, to tenants by the entirety, during the lawsuit or soon after the judgment is entered. Switching property title types just to thwart creditors, is not usually legal. Usually, only the creditor can challenge such a title-type change, by paying for (a typically expensive) court battle.

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