Legal Definitions - dump-buyback

Dump-buyback, also known as asset dump and buyback, is a method used by business owners to avoid paying off their debts. In this method, the business owners sell their assets to a friend at a lower price and then buy them back under a new businessorganization without the original debt. This way, they can get rid of their debt without actually paying it off.

Let's say a business owner owes $100,000 to a lender. Instead of paying off the debt, the owner decides to use the dump-buyback method. They sell their assets to a friend for $50,000 and provide financing for the purchase. Then, they buy back the assets under a new business organization without the original debt. This way, they have avoided paying off their debt.

This method is ethically questionable and could be considered fraud, depending on state statutes, judicial interpretation, and situational facts.

The example illustrates how dump-buyback works and how it can be used to avoid paying off debts. It also highlights the potential legal consequences of using this method.