Court Denies Creditor Application For Pre-Judgment Asset Freeze

Many prospective debtors are concerned that a court may impose an asset freeze as they try to avoid collection of a money judgment. An asset freeze substantially tips payment negotiation in favor of the creditor because the debtor can do nothing to protect himself without risking contempt of court sanctions.

In a recent federal district court proceeding a judgment debtor made a blatant fraudulent transfer of a property to a third party during a civil lawsuit for money damages. The creditor pointed out the fraudulent transfer in an amended complaint and asked the federal court to freeze the defendant’s other assets to prevent further fraudulent transfers and asset dissipation.

The district court judge denied the creditor’s application for a freeze order. The judge said that although a court has inherent equitable power to impose an asset freeze in advance of a judgment, the law requires “considerable evidence” of likely future asset dissipation. The judge concluded that a single transfer of a house to the debtor’s relative was not enough to demonstrate likely future asset transfers warranting a freeze. The court referred to a line of Supreme Court cases placing significant limits on injunctions against defendants in advance of a final judgment. This judge stated that asset freezes are appropriate in more egregious situations where the defendant has a history of creditor evasion.

In many other countries make it much easier for a civil plaintiff to freeze a defendant’s assets upon the filing of a civil lawsuit.  This case is Allstate Ins. Co.v. Baglioni, 2011 WL 5402487

Last updated on May 22, 2020

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