If you’re trying to collect on a judgment, it’s important to find out if your debtor has any hidden assets. The concept of hiding assets to avoid paying a judgment may seem theatrical, but hidden assets are a huge problem in cases like divorce and civil litigation. Hidden assets not only undervalue the wealth of the debtor, but the act of hiding assets is very much illegal. There are a plethora of places where a debtor can conceal their assets. The ability to hide assets in multiple places can make it difficult to prove that the hidden assets ever existed, but it’s not impossible to track them down. According to Active Intel Investigations, a licensed private investigative agency specializing in asset search, there are 14 common places to find hidden assets of a debtor:
#1: Hidden bank accounts
Hidden bank accounts are one of the most common types of hidden assets. Not only will bank account balances reveal the wealth of your debtor, but transactions on these hidden bank accounts may lead to additional sources of hidden assets. Want to learn more? Check out our article on how to find hidden bank accounts.
#2: Quit claim deeds
Debtors may attempt to quitclaim the property they own to someone else to make it seem like they don’t own property. In some cases, they may quitclaim the property more than three times to create additional filings and seemingly separate themselves from the property. A simple way to find out if a debtor is the owner of a property is to look at the most recent insurance and tax payments. If a debtor attempts to hide property in someone else’s name, the other party will not be paying the taxes and insurance on the property.
#3: Corporate records
People will often hide assets under corporations to avoid being traced to them directly. Corporate records for all legitimate companies in the US can be found in each state’s Secretary of State database. The Secretary of State database is publicly available in all 50 states, but not all information will be free to obtain. LendingTree provides a directory for Secretary of State websites in all 50 states here.
#4: Insurance policies
Did you know people can prepay and overpay on insurance policies? Common in divorce cases, individuals may prepay or overpay on policies like life insurance and vehicle insurance to later obtain a refund or simply prepay to avoid paying their judgment. Some insurance policies even have a cash surrender policy like in the case of life insurance. Check all of the insurance policies that your debtor has to ensure funds are not being deceptively allocated prematurely.
#5: Tax overpayment
Similar to insurance overpayment and prepaying, people can also prepay and overpay on their taxes to be applied to future payments. This way, the IRS is in control of the funds and they are not available to creditors.
#6: Settlement statement (HUD-1)
The settlement statement (HUD-1) form is part of a real estate transaction and notes all transactions related to the property. Additionally, the statement shows cash at settlement to or from the seller and the exact amount of money that the seller walks away with. Using this form can help put together the pieces of the debtor’s true status of wealth after the transaction.
#7: Conservation easement
According to the National Conservation Easement Database (NCED) “a conservation easement is a voluntary, legal agreement that permanently limits the use of the land in order to protect its conservation values”. A buyer of this agreement can keep this off of public records and can be overlooked on the debtor’s books. However, this method to hide assets is slowly becoming more common.
#8: Shell corporations
Sometimes individuals create corporations just to oversee other corporations. Think of shell corporations as literally an outside shell that has the ability to conceal and relocate assets for the inside corporations. Records of this can be obscured with names of registered agents and other officer names. One way to connect your debtor with a shell corporation is to look through the Secretary of State records for law firms connected with the official documents. If you can find a law firm, you may be able to connect them to the debtor.
#9: 199A tax deduction
Certain businesses and sole proprietors are eligible for tax deductions and some use this method to hide thousands of dollars. Although the funds may need to be recaptured at a later date.
#10: Retirement accounts
Many people assume that money put into retirement accounts like a 401K cannot be reached until they reach a certain age, but that’s not the case for their creditors. These funds can be found and traced back to the debtor and accessed by the creditor to collect on a judgment.
#11: Poker chips
Many gamblers think that they can take poker chips and hide them as a physical asset, but that’s not at all the case. Casinos keep detailed records of transactions and gaming history for players, if a debtor is hiding assets in poker chips, the casino is going to have a record of that.
Vehicles are an obvious asset to most, but vehicles can also be concealed assets. To avoid being the recorded owner, the debtor can transfer the vehicle title into someone else’s name making them the legal owner of the asset. To find vehicle records, check with the DMV where the debtor lives or has lived. Motor vehicle records are not public information but can be accessed by submitting an official request in most cases.
Did you know that you can register your boat with the coast guard rather than your state? According to Boat U.S., boats have to be registered with either one or the other, they cannot be registered with the coast guard and titled in a state. While these ownership records may be difficult to navigate, they’re not impossible to find.
#14: Delayed income
An individual can work with their employer, or secretly, to defer or delay their income. This way it seems like the debtor has significantly less income or even has a negative account balance. While their accounts are seemingly draining, they’re building up a balance with their employer to release at a later date. If you’re attempting to garnish someone’s wages, this is an extremely important place to look for hidden assets because garnishments only pertain to a certain amount of income.
There are many other places to find hidden assets and all avenues should be pursued when conducting an asset search. Finding hidden assets relies on the ability to analyze and comprehend patterns of a debtor’s transactions. Always look for hidden assets prior to litigation to ensure your debtor isn’t concealing assets before your investigative team gets the chance to search for them. Hidden assets can’t stay hidden forever.