Are You a Victim of Fraud or Fraudulent Transfers? Attach Now!

Consider this scenario. You have evidence that an entity or individual who owes you money is fraudulently conveying, assigning, concealing or disposing of assets in an attempt to stall or evade. In fact, this company or person may have gone so far as to say, "You can either wait for your money, or I'm going to take everything out of my name so that I am uncollectible and you will never get a dime!" Most creditors have heard something along these lines before. Perhaps you've become aware that a debtor is conveying money, stock or real estate to relatives or other "insiders" as a way of preparing for the landslide of money judgments that will inevitably come on the heels of an anticipated business failure.

Under these circumstances, does it make sense to stand in line with (or behind) other creditors? Do you start litigation early, with the hope that your counsel is able to win the footrace to the finish line of judgment? If neither of these options sounds appealing, the Illinois Attachment Act may provide an alternative. The act allows creditors, in certain situations, to "attach" a debtor's assets now, before you get to judgment.

Attachment and the Detection of Fraud

While attachment is considered an extreme remedy—and one that courts are generally reluctant to grant—it is important to know that the Illinois Attachment Act is liberally construed by the courts for the detection of fraud. How does this work? Creditors must show by sworn affidavit that a debtor has, within two years, fraudulently conveyed, assigned, concealed or disposed of property. However, you do not have to wait until you have already become a victim. Instead, a creditor may provide a sworn affidavit proactively if it has information that the debtor is preparing to conceal, assign or otherwise dispose of property so as to hinder or delay creditors.

Must a creditor show that it was actually hindered or delayed? The answer, according to the Illinois 2nd District Appellate Court, is no. In Amcore Bank, N.A. Rock River Valley v. Hahnaman-Albrecht, Inc., the court determined that a creditor only needed to show that the debtor's actions were made with the intent to hinder or delay. Furthermore, as established more than a century ago in Conyne, Stone & Co. v. Jones, fraud will be presumed if the transfer was made by an insolvent entity.

In order to obtain attachment, the creditor need only file the affidavit setting forth the bases of the fraudulent activity at or after the commencement of the action. Attachment does not require the creditor to issue a summons, nor does it require service of process upon the party to be attached. Although the suspension of this basic due process right may seem counterintuitive, there is a compelling reason for it. If a creditor's legal actions to recover property become known, it is likely that the person or entity intent on carrying out the fraudulent act will more hastily convey, assign, conceal or dispose of the property. Because the usual "notice and opportunity to be heard" element of our due process system of justice is suspended in this type of proceeding, bond must be posted—in an amount double the dollar figure the party seeks by attachment—before a party may obtain an attachment order.

Remember that attachment is a remedy that should be reserved for only those limited circumstances where fraudulent activity is relatively obvious. In those cases, however, the provisions of the Illinois Attachment Act may be an ideal means of protecting your rights.