Defrauding Secured Creditors in New Jersey: An Overview for Lawyers

Defrauding secured creditors is a criminal offense in New Jersey under Section 2C:21-12 of the New Jersey Code of Criminal Justice. This law makes it illegal for a person to intentionally hinder a creditor’s security interest in collateral by damaging, hiding, transferring or otherwise disposing of the collateral property.

The Law in New Jersey

The specific language of Section 2C:21-12 states:

A person is guilty of a crime of the fourth degree when he destroys, removes, conceals, encumbers, transfers or otherwise deals with property subject to a security interest with purpose to hinder enforcement of that interest.

This statute establishes defrauding secured creditors as a crime of the fourth degree in New Jersey. Fourth degree crimes are the lowest level of criminal offense in New Jersey, punishable by up to 18 months in prison, a fine of up to $10,000, or both.

Common Defenses

There are several defenses that can potentially defeat charges of defrauding secured creditors:

• Lack of intent – The defendant did not act with purpose to hinder enforcement of the security interest. For example, they may have sold the property believing the loan was fully paid off.
• Valid legal purpose – The defendant had a lawful reason for moving or disposing of the collateral, such as selling off inventory in the normal course of business.
• No security interest – The creditor did not actually have an enforceable security interest in the property.
• Bankruptcy – Transferring assets may have been legally permitted as part of a bankruptcy proceeding.
• Authorized by creditor – The creditor consented to or authorized the disposition of the collateral.

Sentencing and Penalties

As a fourth degree crime in New Jersey, defrauding secured creditors carries the following potential penalties:

• Up to 18 months in prison
• Up to $10,000 in fines
• Restitution to compensate the victim for losses
• Probation for up to 5 years

Sentencing will depend on the specific circumstances of the case and the defendant’s criminal history. First time offenders may receive more lenient sentences involving only probation or restitution.

Related Crimes

Defrauding secured creditors is closely related to other theft and fraud crimes in New Jersey, such as:

• Theft by deception – Obtaining property by intentionally creating a false impression.
• Theft by failure to make required disposition – Keeping or using collateral contrary to agreements.
• Falsifying records – Altering documents to conceal unlawful transfers.
• Money laundering – Engaging in financial transactions to conceal illegal activity.

The full context of the case is important in determining which charges may apply. Prosecutors can potentially stack multiple charges based on the specific facts.