Fraudulent Conveyance Recovery In Florida
Recovering assets fraudulently hidden to avoid payment
Our state has two separate and distinct statutes to assist creditors when a debtor has committed fraud. Often, a judgment debtor may appear to be insolvent and uncollectible based upon their testimony and documentation produced. In reality, they may have transferred their assets to third parties or otherwise hidden assets that can be recovered.
Florida Statute 59.26, The Florida Proceedings Supplementary statute, allows a judgment creditor to implead (add as a defendant) any person or entity that was the recipient of a conveyance made to defraud creditors or delay collection of a judgment. The court, assuming it finds that assets were improperly transferred, may order the assets returned to the debtor’s estate for sheriff’s levy, garnishment, or other execution, or may hold the implead party liable for the debt up to the amount of the improper conveyance. The statute is vague as to how it is to be enforced, leaving the courts broad discretion to fashion a remedy that best does justice to the creditor, while ensuring that the implead defendant is accorded its due process as required by law.
The second remedy designed to assist creditors in recovering assets fraudulently transferred is Florida Statute 726, entitled the Florida Uniform Transfer Act. This statute allows a creditor to void fraudulent transfers both before and after judgment against a debtor. It allows, among other remedies, for the appointment of a receiver or for injunctive relief to halt or reverse a fraudulent conveyance.
Both statutes and various remedies can be employed together or separately, depending upon the facts of each case. Each of the potential remedies has a different Statute of Limitations and has other subtle differences, as well. We often see transfers to family members, irrevocable trusts, and business entities that, upon first glance, indicate that the debtor has no interest in same. We can sometimes “peel back the onion” and discover the trail leading to a fraudulent conveyance.
One of the important aspects of discovering and recovering assets that have been fraudulently transferred is to establish that the recipient of the transfer has not paid “fair market value” for the assets. This involves subpoenaing financial records, closing statements, and other documents that might tell all or part of the story. The “fair market value” issue oftentimes occurs when a business closes its doors and the principals start a new business, often at the same address, with the same inventory and the same employees. Occasionally, the mystery may be solved if a secured creditor is involved who has taken action to foreclose their security interest. Typically, it falls to the creditor to do the investigation, subpoena records from the debtor and third parties, and take the initiative to prove the fraud and recover their money.
Occasionally, debtors may transfer their assets offshore to a “safe haven”. While this can pose challenges, if it is economically feasible, and depending upon the jurisdiction of the foreign country, we can hire foreign counsel in that jurisdiction to assist in recovering assets for our clients.
At Marcadis Singer, P.A., we have over 30 years of experience in discovering fraud and recovering assets using these remedies. For more information, please contact Gil Singer at firstname.lastname@example.org.
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