Dump buyback (also called asset dump and buyback) is an ethically questionable method of getting around business debt. Business owners who are struggling with debt will “dump” the assets of the business by selling them to a friend at a liquidated price, and the original owners will provide the financing for the purchase. Then the business owners will “buyback” the assets from the friend under a new business organization without the original debt, and the original business will be dissolved. This scheme destroys debt owed to lenders, and depending on state statutes, judicial interpretation, and situational facts, could be considered fraud.
[Last updated in June of 2021 by the Wex Definitions Team]