How to fight fraudulent exemption of execution claims by debtors

On Behalf of | Nov 3, 2022 | Business Disputes, Contract Disputes

If you are owed money from a bankrupt individual who lied about their income or who claims they cannot pay your secured debt because their property was exempt from execution, you may have some legal recourse to reclaim the funds due. One way is to fight the debtor’s fraudulent exemption of execution by taking action in the court where the case was filed or in bankruptcy court. Read on to learn more about how to fight a fraudulent exemption of execution claim and what documents you need to present during the proceeding.

What is an exemption of execution claim?

Exemption of execution is a law specifying what property can be seized and sold to pay creditors. When a debtor files for bankruptcy, they may be able to exempt some property from seizure. This condition depends on a debtor’s honesty when they file for bankruptcy, assuming they do not try to exempt more than the law allows them.

What makes an exemption of execution claim fraudulent?

To classify an exemption of execution claim as fraudulent, the documents used for the claim must be proven false or invalid. Furthermore, the debtor must know the document is invalid and have the intention to use it for a false claim. 

Examples of fraudulent exemptions of execution claims

Debtors can try several methods to fraudulently claim exemptions of execution. In one scenario, a debtor could claim their property is exempt due to a transfer in ownership in contemplation of bankruptcy, but in reality, the transfer occurred before the bankruptcy petition was filed. A debtor could also attempt to misappropriate a law to apply to their asset when no valid law applies. A debtor can also attempt an exemption on credit card debt, claiming no nonexempt property. 

What can a creditor do about a fraudulent exemption claim?

A creditor can object to a debtor’s exemption of execution claim when it is fraudulent. The creditor must show the court evidence that the exemption was fraudulently claimed and present a legal argument why the exemption should be denied. The court may deny the debtor’s exemption, and in this case, creditors may seize assets in order to satisfy their claims against the debtor.