Is this note fraud?

[Robert Howell]

I bought a non performing note in Kansas City. It is an institutional note that was originated in 11/2006. Next payment due was 1/2007. This was an investment property. I believe the borrower cashed out the property. The property was purchased in an LLC, but the note was taken out in the borrower's personal name.

The investment property is virtually worthless but the borrower’s personal residence, in California, is worth 7 figures.

The problem is that four months after the funding of this note,the borrower, in 3/2007 put her personal residence into a family trust. That property has lots of equity.

Can I go after her family trust to recover the unpaid balance or has she been able to circumvent her obligation?

[Account Closed]

Originally posted by @Account Closed:

Many state-specific issues here, primarily the statute of limitations and fraudulent conveyance rule in Kansas. You cannot foreclose on a property that has been titled in a trust for 6-7 years and did not originally secure your note without a judgment/court order (assuming KS is a non-judicial foreclosure state). You need to reduce the note to a judgment against the debtor before going after other assets such as the personal residence. Since the transfer to the trust is public record, my guess is that your fraudulent conveyance claim will be time-barred, but you never know...look up how long the statute of limitations is for fraudulent conveyance in Kansas and when it accrues (i.e. actual or constructive notice of the transfer). Not legal advice.

What fraudulent conveyance are you all talking about? I don't understand the claim that the conveyance of the CA property has anything to do with fraud. If the CA property wasn't used to secure the subject loan, the borrower is free to sell or transfer the property. If the property was transferred to a family trust, that's not even an attempt to hide an asset. A family trust isn't judgment proof.

If the OP gets a judgment where the property is located and then records that judgment in CA, it will cloud title, even if the property is in a family trust.

Where SOL might apply is on the lack of collection on the note for so many years. Check the SOL for note collection in whatever state the property is in.

Hopefully the OPs note can be turned into a judgment

I'm curious why the OP bought a note and is asking these questions now????