Q: Can a business avoid paying a debt by giving assets to someone else? (Debt was a mortgage for an investment property).
My girlfriend owns her own business which is incorporated. She's the only employee and works out of our home. We live together. A few years ago, her tech business invested in a coastal property.
1- At the same time, my gf & her ex-husband jointly owned a different property. They'd kept the 50/50 ownership after divorce. Her business was not involved. When this jointly owned property sold, she took her ex's equity & applied it to her business's property debt. Her business had stopped paying this mortgage the year before. Her ex was not part of her business & not on the deed. Is this an issue?
2 - Also, she gave me about $100,000 through real estate transactions (these were personal transactions but she could have paid the bank). This was shortly before the business-property's foreclosure date. I paid off my own real estate debts. She closed her tech company & opened another, then closed that. Everything was in NC. Are we ok?
Would appreciate any comments.
A: It depends on the transaction and how it is structured. Generally you can't avoid debts by transferring property and assets to insiders, particularly for no payment. The creditor can file an action to avoid the transfer based on several factors. Thus, if you are tranferring assets, it has to be for a legitimate business purpose and for the value of the asset. Since your questions are fairly detailed, you will need to discuss the transactions with an attorney for complete assistance.
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