Judgment creditor is pulling my son although he is not involved in lawsuit

[chris445]

What is the name of your state? Florida

I lost a judgment. When the lawsuit was going on, I loaned around 12,000 dollars to my son and, after two years, he paid it back with 3% interest and I reported that interest income in my tax returns of the year in which the loaned was paid back with interest. The next year, i.e., now, the judgment is entered and he garnished my money. He is arguing that that 12,000 dollars loan, which is paid back, was fraudulent transfer, referring to http://www.leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&URL=0700-0799/0726/0726.html 726.105(b) and 726.106(1) states " ...Without receiving a reasonably equivalent value in exchange for the transfer or obligation." and also referring to 726.105(a) " With actual intent to hinder, delay, or defraud any creditor of the debtor;"), accusing that I made that loan just to hinder the plaintiff.

Did I violate any provision of rule 726 or anything else due to that loan? The creditor wants to simply pull my son also into this matter and get money from him as well. He is also referring to http://www.leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&Search_String=&URL=0000-0099/0056/Sections/0056.29.html . I lost everything. request your comments.

 

[TigerD]

Your situation is too technical for an internet forum. You need to talk to an attorney in your state and provide all the relevant information to get an accurate opinion.

TD

 

[quincy]

For what reason did you loan your son the money?

I agree with TigerD that you should seek out an attorney in your area for a personal review.

 

[chris445]

Thanks for the responses. I loaned for his basic living as he has no job.
For another son, Jim, I directly paid the fee for few semesters totaling 15000 dollars. The payment directly went to his college, he did not receive any. Is he also responsible for that payment. The college fee for jim was also paid when the lawsuit was pending, and Jim did not pay me back any money in return to that college fee. Will Jim be also be dragged into this matter although plaintiff did not say anything about Jim until now.

 

[LdiJ]

What is the name of your state? Florida

I lost a judgment. When the lawsuit was going on, I loaned around 12,000 dollars to my son and, after two years, he paid it back with 3% interest and I reported that interest income in my tax returns of the year in which the loaned was paid back with interest. The next year, i.e., now, the judgment is entered and he garnished my money. He is arguing that that 12,000 dollars loan, which is paid back, was fraudulent transfer, referring to http://www.leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&URL=0700-0799/0726/0726.html 726.105(b) and 726.106(1) states " ...Without receiving a reasonably equivalent value in exchange for the transfer or obligation." and also referring to 726.105(a) " With actual intent to hinder, delay, or defraud any creditor of the debtor;"), accusing that I made that loan just to hinder the plaintiff.

Did I violate any provision of rule 726 or anything else due to that loan? The creditor wants to simply pull my son also into this matter and get money from him as well. He is also referring to http://www.leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&Search_String=&URL=0000-0099/0056/Sections/0056.29.html . I lost everything. request your comments.

If your son can prove that he paid you back, with interest, then the creditor should fail in pulling your son into the case.

 

[adjusterjack]

How much is the judgment for?

 

[chris445]

Thank you LdiJ.

Thank you adjusterjack. It is for 22,000

For another son, Jim, I directly paid the fee for few semesters totaling 15000 dollars. The payment directly went to his college, he did not receive any. Is he also responsible for that payment. The college fee for jim was also paid when the lawsuit was pending, and Jim did not pay me back any money in return to that college fee. Will Jim be also be dragged into this matter although plaintiff did not say anything about Jim until now.

 

[Taxing Matters]

Did I violate any provision of rule 726 or anything else due to that loan?

Making a bona fide loan with an interest charge is not a fraudulent transfer. It would be a fraudulent transfer if you made the loan and never intended to enforce it or planned to simply forgive the loan later, i.e. the loan was really a disguised gift. Since the son indeed repaid the loan with interest there is clearly no fraudulent transfer here and the creditor should not succeed in any effort it makes to pursue your son for it.

For another son, Jim, I directly paid the fee for few semesters totaling 15000 dollars. The payment directly went to his college, he did not receive any. Is he also responsible for that payment. The college fee for jim was also paid when the lawsuit was pending, and Jim did not pay me back any money in return to that college fee. Will Jim be also be dragged into this matter although plaintiff did not say anything about Jim until now.

That payment of tuition and fees, on the other hand, would be potentially fraudulent transfer because you in effect made a gift to your son of the $15,000. It is no different than had you given Jim the cash and Jim paid the tuition and fees himself. You made the transfer and got nothing back of equivalent value in return at a time that you were insolvent, which is the basic description of a fraudulent transfer. So the creditor might well succeed in getting a court to order your son to return the $15,000 to you so it can take that money to satisfy the judgment against you. Whether it will succeed depends on exactly what is presented to the court, so there's no way for me to predict the outcome of that.

 

[LdiJ]

Making a bona fide loan with an interest charge is not a fraudulent transfer. It would be a fraudulent transfer if you made the loan and never intended to enforce it or planned to simply forgive the loan later, i.e. the loan was really a disguised gift. Since the son indeed repaid the loan with interest there is clearly no fraudulent transfer here and the creditor should not succeed in any effort it makes to pursue your son for it.



That payment of tuition and fees, on the other hand, would be potentially fraudulent transfer because you in effect made a gift to your son of the $15,000. It is no different than had you given Jim the cash and Jim paid the tuition and fees himself. You made the transfer and got nothing back of equivalent value in return at a time that you were insolvent, which is the basic description of a fraudulent transfer. So the creditor might well succeed in getting a court to order your son to return the $15,000 to you so it can take that money to satisfy the judgment against you. Whether it will succeed depends on exactly what is presented to the court, so there's no way for me to predict the outcome of that.

Really? If the son is of the normal age to go to college and dad paid for his college in the normal course of things that could be considered a fraudulent transfer?

 

[Taxing Matters]

Really? If the son is of the normal age to go to college and dad paid for his college in the normal course of things that could be considered a fraudulent transfer?

Yes. The son is almost certainly an adult and in any event the dad has no obligation to pay for the college expenses unless there is a court order requiring it. Absent a court order obligating the dad to pay for it, the expense is completely voluntary for dad to make. Sure, many parents do it and consider paying for at least part of college to be something they should do, but it is nevertheless still a gift and thus a fraudulent transfer if made when the dad is insolvent. It's no different than giving the kid the cash to something else with. The fact that it is for college doesn't make it special or exempt it from the fraudulent transfer rules.

 

[Litigator22]

Making a bona fide loan with an interest charge is not a fraudulent transfer. (?) . . .

I don't believe that statement to be categorically correct. Not when the lender is otherwise unable to meet his obligations when they become due, the loan is unsecured and the borrower is an insider. (Florida's Uniform Fraudulent Transfer Act Section 726.105)

 

[LdiJ]

I don't believe that statement to be categorically correct. Not when the lender is otherwise unable to meet his obligations when they become due, the loan is unsecured and the borrower is an insider. (Florida's Uniform Fraudulent Transfer Act Section 726.105)

It is certainly correct when the money has already been paid back, with interest, prior to the judgment being entered...which happens to be the case here.

 

[Litigator22]

It is certainly correct when the money has already been paid back, with interest, prior to the judgment being entered...which happens to be the case here.

Miss wannabe you are floundering! So please either get up to speed or get out of the deep end of the pool. My discourse with TM has to do with a creditor's claw back rights with respect to an active loan of money NOT one that has been repaid for god's sake!

 

[Taxing Matters]

I don't believe that statement to be categorically correct. Not when the lender is otherwise unable to meet his obligations when they become due, the loan is unsecured and the borrower is an insider. (Florida's Uniform Fraudulent Transfer Act Section 726.105)

When the loan is to an insider it might run afoul of the insider rule, as you point out. But since here the kid paid the loan back, I didn't get into the insider rule as it becomes moot at that point.

 

[zddoodah]

He is arguing that that 12,000 dollars loan, which is paid back, was fraudulent transfer

Arguing to whom? Has the judgment creditor filed something with the court in which he makes this argument?

Did I violate any provision of rule 726 or anything else due to that loan?

Not as you described it.

The creditor wants to simply pull my son also into this matter and get money from him as well.

Nothing you can do to stop him from trying. It will be up to your son to prove that the transaction was as you described it and that he repaid the loan. Sounds like that shouldn't be terribly difficult.