Forbes: Lawyer, Law Firm and Bank Exposed to Civil RICO and Other Liability for Assisting a Debtor Post-Claim in Kruse (November 24, 2021)

Forbes has published an article, “Lawyer, Law Firm and Bank Exposed to Civil RICO and Other Liability for Assisting a Debtor Post-Claim in Kruse”, which discusses certain types of asset protection planning that can cause sever consequences to the debtor. The article begins as follows:

As I have explained many times, when there is planning for a debtor who already has a claim pending, that is nothing like asset protection planning but is instead (outside some very limited exemption planning and the like which is permissible) just plain old fraud on creditors. Yet, some planners seem to think that they ought to engage in this type of planning, and so we routinely see reported opinions mostly in the area of voidable transactions where that sort of planning not only failed, as it should, but often resulted in more severe consequences to the debtor. We have seen cases where debtors have been hit with punitive damages, big attorney fee awards, and have lost their discharges in bankruptcy, all in addition to losing the assets that they were trying to protect. But here we see another side of such post-claim planning, where the planner and the bank involved themselves get sued for allegedly trying to assist the debtor in cheating his creditors.

The opinion that follows comes up on a motion for summary judgment, which does not include any factual findings by the court, but rather findings that the creditor has presented at least minimal evidence that such facts might exist (which is very different). I am advised that this case ultimately resulted in a settlement between the parties involved, so there will never be any adjudication by the court on the merits. The defendants in this case fervently denied and disputed the factual allegations. Please keep that in mind as we go through this opinion.

Be also advised that I was one of the expert witnesses for the creditor in this case, to testify on fraudulent transfer issues had it gone to trial. Nonetheless, my intention is to stick strictly to the text of the opinion in this matter, and attempt to divorce myself from any viewpoints based on my special knowledge of facts not in the opinion, and which would be irrelevant to anything anyhow. This is nothing like an important case because I was involved with it, but rather that this is a published opinion on an important matter of planner and lender liability for alleged voidable transactions under Iowa’s Uniform Voidable Transactions Act (UVTA), which, being a uniform Act, means that this opinion could extend to other cases in the many states that have adopted the UVTA or its predecessor, the Uniform Fraudulent Transfers Act (UFTA).

Click here to see the full article: “Lawyer, Law Firm and Bank Exposed to Civil RICO and Other Liability for Assisting a Debtor Post-Claim in Kruse”

Posted by Marin Larkin, Associate Editor, Wealth Strategies Journal.

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