In a divorce, a collusive property settlement is pernicious to creditors because it can be employed as an inexpensive and expeditious asset protection device to defraud a debtor-spouse’s creditors. In the context of this article a collusive property settlement is defined as where the spouses conspire to utilize a property settlement agreement that is usually incorporated into a judgment of divorce as an asset protection device to intentionally defraud one of the spouse’s creditors.
Indicia of a collusive property settlement include the execution of the property settlement during pending litigation or during judgment enforcement,1 a fast track divorce,2 the transfer of all of the debtor-spouse’s non-exempt property,3 an unequal division of property,4 the debtor-spouse’s filing for bankruptcy shortly after the finalization of the divorce,5 and the debtor-spouse remaining in the marital residence after he or she has transferred title of the marital residence to the other spouse.6 An unscrupulous debtor might contend that a divorce judgment is sacrosanct, and therefore, is immune from attack by the debtor’s creditors.
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