Cook county tax lien certificate

Interested in attachments from Afghanistan, bankruptcy from Bulgaria, civil rights from Ceylon, escheat from Estonia, guaranties from the Georgian Republic, levies from Lebanon, preferences from Peru, or replevin from Russia? Or, what about users, suers or abusers right here in the good old U.S.A.? That is what we offer you in this issue-a local tour of thugs, thieves and charlatans, all generically called frauds and fraudulent conveyances.

This excursion takes us through the familiar boulevards of fraudulent conveyances, avenues of corruption, side roads of dishonesty and back roads of theft. Along the way we depict these common, but interesting fact patterns as Stops, with the accompanying Pitfalls, Turnouts, Detours and Back Roads. Although some fact patterns and their solutions slightly overlap, the grand tour furnishes the largest overview in this area of fraudulent conduct.

Stop # 1. Interspousal Transfers and Security Interests

Fred and Mary own a woman's clothing boutique. Operated in her name only Mary purchases stupendous quantities of wide belts and bell bottoms slacks. Her timing is rotten; the fashion magazines dictate narrow belts and tapered pants. Stuck with gargantuan trade bills for outdated inventory, Mary fields daily telephone calls from collection agencies who, finding no success in dunning, forward the claims to local counsel for suit. From a community bank account, but bearing his name only, Fred lends Mary money to pay about half the trade bills, and Mary executes a note and blanket lien to secure this debt. In the face of the remaining trade bills and ensuing collection actions, Mary perseveres with the business, buys and sells inventory, hires and fires employees and even brings in a small profit.

Upon judgment on the remaining trade bills, counsel installs a sheriff's keeper in the store, which prompts Fred to file a third party claim, asserting a priority through the security interest.

Question: Will the blanket liens fend off the judgment creditor's levy and execution, and why or why not? Does Fred have any exposure for trade bills?

Answer: Probably not. In conveying the bank account funds to Fred, the marital community fraudulently conveys its property to Fred's separate estate. In granting the security interest in the store assets, Mary also fraudulently conveys a community asset to Fred's separate estate.

Through the third party claim, Fred claims priority through the security interest and, if opposed by the creditor, invites the court to examine the bona fides of his lien interest. The burden of proof allocations control fraudulent conveyances cases. For example, Mary is presumed insolvent, if not paying her bills regularly; interspousal transfers suggest fraud; scarce or nonexistence documents for inter-family transfers strongly evidence fraud; a transfer between family members shifts the burden of solvency to the grantee; or family members might bear the affirmative burden to prove consideration and its fair market value. In trying any fraudulent case, counsel moves the court to allocate the burden of proof.

Is Fred liable for the trade bills? Yes, if the business is community and if its income supports Fred. Yes, if Fred is a partner which is evidenced by the bank signature cards naming him as partner, or fictitious business records, city business tax permits, city business licenses, county permits, health permits or sales tax permits listing him as a co-owner

Is Fred also liable because he has a security interest? No, unless Fred engages in egregious conduct that induces or invites unsecured creditors to extend credit to the debtor who defaults. Additionally, upon receipt of any collection through his security interest, Fred has affirmative in person,am liability for a fraudulent conveyance.

Pitfalls: Armed with a bogus security interest, conveyees, such as Fred, will file a third party claim that forces the creditor both to proceed with a third party claim, an expensive proposition, and to post a bond to retain the attached property, a more expensive undertaking, which most creditors decline. Even assuming Fred's lien is a total fraud, the third party claim process still succeeds in unhorsing the creditor due to the expense of any viable challenge.

Turnout: Confronted with financial disaster which prompts decisive action, Mary and Fred fraudulently convey their business assets, construct phony liens, and conceal their bank accounts. These events justify an ex parte writ of attachment, both to sequester the assets, subject to the suspect conveyance, and the remaining assets, because debtor's course of conduct evidences an intent to conceal, hide and secret.

Most local rules mandate 24 hours notice to the defendant as a condition to any ex parte relief, an issue confronting the creditor's attorney. Sometimes, this notice destroys the provisional remedy because notice impels the defendant to dispose of any remaining assets (empty bank accounts) to frustrate the writ process. Justify complete secrecy in the writ application through evidence of hatred toward the creditor, such as: "You'll never see a dime." "By the time the sheriff gets here, I'll empty the place." "Sue me, and I'll file bankruptcy." Look for strong evidence of personal dishonesty, centered around the fraudulent conveyance, or complete financial destitution in the debtor's correspondence.

Stop # 2. Restrictive Endorsement Checks, Foreclosures and Waste of Assets for Payment of Non-Corporate Bills

Surviving this attack and instead of waiting for the next disaster, Mary consults an attorney who advises her to incorporate the business. Upon incorporating, Mary transfers the boutique's asset to Mary's Inc. Still indebted to her husband, Mary pledges her shares of stock to Fred as security for the unpaid loan, aside from the blanket lien on the store assets.

Pestered by her pre-incorporation creditors, who drag her into court with Orders of Examination, Mary stocks her incorporated business with highly salable inventory, springs a massive liquidation sale on the public, and sells the inventory to the bare walls. Loaded with ready cash, she pays first the pre-incorporation bills, retires part of her husband's debt, but offers the corporation's creditors pennies on the dollar as full payment, accompanied by correspondence claiming insolvency and intimating a no-assets bankruptcy if the creditors reject the compromise. Mary continues to operate the store. Fending off Mary's personal creditors who levy on the share of stock in his hands, Fred forecloses on the shares of stock by removing Mary's name on the stock certificate and inserting his own without notice to anybody.

Banking Mary's token payment checks, most creditors accept the offer and write off the balance, but a minority of creditors reject the checks, retain counsel and sue. Upon learning of legal action, some accepting creditors even join in the litigation.

Question: Can the creditors (accepting and rejecting) sue and who? Can Fred defend on his pre-incorporation security interest?

Answer: Let us define the claims, first. The corporate creditors have claims against Mary and Fred for a fraudulent conveyance for distributing corporate assets to pay pre-incorporation creditors because they are the ultimate beneficiaries in receiving debt relief. The corporation, and possibly judgment creditors, have additional claims against Mary and Fred for an unlawful dividend, however, general creditors probably lack standing. The court will order repayment of all insider payments, which are unlawful dividends.

To bring apparent legitimacy to the transaction, Mary causes her corporation to assume the pre-incorporation debts. However, the corporation does not receive any equivalent value, rendering the assumption of such debts another fraudulent conveyance itself.

Can the corporate creditors sue the pre-incorporated creditors to return the money? Uncertain, because a subsequent conveyee (pre-incorporated creditors) probably received the money in good faith, but without value. On the other hand the pre-incorporation creditors would claim value because they have a "colorable claim," against the corporation.

Cashing restrictive endorsement checks prejudices the accepting creditors; Commercial Code Section 3311 forces creditors to reject the check or return the money, unless sent to the wrong person in an organization. Section 3311 is a very detailed section.

How's Fred? Doing very poorly. Upon foreclosure of his security interest in the stock, and without notice, Fred probably discharges his entire debt, owed by Mary, and loses his ability to fend off Mary's corporate creditors through his security interest. Furthermore, Fred's security lapses under the four-month rule of Section 9402(7) or evaporates through the consented transfer of the sole proprietorship to the corporation under Section 9306(2). Watch for insider errors in handling their Article 9 security interest.