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Judgment against a corporation

Lutz, FL |

Hi... I have an s-corp. The company has no assets, property... it just has a few $$$ in a bank account. We just lost a bogus judgment in small claims for $5K.

I want to incorporate a new business and take the few remaining dollars I have in the old one and put in the bank account of the new corporation.

My question is... can they find the money in the new company and seize the new company's bank account?

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Attorney answers 2


The assets of a corporation must be used to pay the debts of the corporation. They cannot just be transfered to you or to another corporation. Now, there is the law and there is what is practical. If we are talking about only a few $$$ (as you say) would it be practical to come for the plaintiff to come after it. The method of obtaining it is a somewhat complicated and little used procedure called a third party interpleader. Your new corporation could be held liable but only to the extent of the assets it received from the old corporation.

The foregoing is offered for informational purposes only and is not legal advice.

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The judgment creditor should not be able to reach the money in the new company's bank account without bringing an independent lawsuit against that company under the Uniform Fraudulent Transfer Act or suing them in proceedings supplementary to the original judgment. Either way, the new corporation would be entitled to notice that it was being sued, and its bank account should not be reachable unless a judgment has been entered against it.

That being said, if you remove assets from a judgment debtor corporation, for the purposes of avoiding paying the judgment, and use those assets to capitalize a new corporation that does the same thing, the judgment creditor can make an argument that a fraudulent transfer has taken place, and possibly hold the new corporation liable as transferee.

You should consult an asset protection attorney to discuss the limits of this liability and the means by which to ensure that the transfers you make cannot be considered fraudulent. Also consider the likelihood that a judgment creditor will institute these sometimes costly procedures to collect on a relatively small judgment.

This information is general in nature, not addressed to a particular case, and not meant to create an attorney-client relationship.

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