Fraudulent Transfer

Fraudulent Transfer
Marcadis Singer, PA, assists lenders in recuperating their assets and money when there is a Fraudulent Transfer or conveyance.

Setting Aside Illegal Transfers

In cases where a debtor has moved property or assets to a family member, close friend, or any other insider to evade paying for a judgment, he could be legally responsible for a fraudulent transfer. Our Florida Attorneys will help you with such claims, which are based mostly on the Uniform Fraudulent Transfer Act, FL Civil Code Chapter 26.

Often times assets are moved to a relative or a corporation which is established only to hide assets, therefore, it is important that if you think a debtor is moving assets to stop you from collecting a judgment you need to get in touch with a knowledgeable collections lawyer right away.

Features of a Fraudulent Transfer Claim in Florida

A transfer generated or responsibility by a person in debt is a fraud regarding a creditor if the creditor’s claim occurred prior to or following when the transfer was created or the obligation was incurred, in the event the person in debt created the transfer or sustained the responsibility as below:

  1. With the specific purpose to obstruct, hinder, or deceive any lender or debtor;
  2. Without getting a relatively comparable value in return for the transfer of responsibility (i.e. a non-arms-length deal to a relative)

and the debtor either:

  1. was involved in a deal in which the outstanding assets of the person in debt were too small relative to the transaction -or-
  2. intended to had an intent to incur or practically ought to have considered that he will probably incur financial obligations beyond his capability to pay off when they became due.

In Anglo-American law, Twyne’s Case was the original doctrine of Fraudulent Conveyance. An English farmer tried to defraud his lenders by offering his sheep for sale to a gentleman known as Twyne, even though he kept ownership of the sheep, stamping and shearing them. In the USA, fraudulent conveyances or transfers are dictated by two groups of legislation which are usually consistent. The Uniform Fraudulent Transfer Act (“UFTA”) is the first one and was put into practice by virtually all but a couple of the states. The second is contained in the federal Bankruptcy Code.

The UFTA along with the Bankruptcy Code state that a transfer created by a person in debt is fraudulent with regards to the lender in cases where the debtor created the transfer with the “actual intention to hinder, delay or defraud” any specific lender of the person in debt.

Two Types of Fraudulent Transfer

There are two types of fraudulent transfer. The classic example is the intentional fraudulent transfer. It is actually a transfer of property created by a debtor with an objective to deceive, obstruct, or delay their creditors. The constructive fraudulent transfer is the second type. This usually happens when a debtor transfers assets without getting “reasonably equivalent value” in return for the transaction when the borrower is not solvent in the course of the transfer or ends up being insolvent or might be left with too little money to remain operational because of the transfer. In contrast to the intentional fraudulent transfer, no motive to deceive is required.

A bankruptcy trustee is authorized via the Bankruptcy Code to retrieve the assets moved fraudulently for the advantage of all creditors of the borrower in the event that the move occurred within the pertinent time period. The transfer may also be reclaimed by a bankruptcy trustee by the UFTA, provided that the state where the transfer occurred has implemented it and the transfer occurred within the pertinent time frame. Creditors could possibly pursue solutions using the UFTA without the need of a bankruptcy.

Since this second kind of transfer will not always require any specific misconduct, it can be a frequent snare into which sincere, yet unsuspecting debtors get trapped when preparing a bankruptcy claim without a lawyer. Especially destructive, but not unusual is the scenario where a grown up child gets title to the parents’ residence as a self-help probate action (to prevent any misunderstandings regarding who is the owner of the residence once the parents pass away and to prevent losing the house to a perceived danger from the state). Afterwards, when the parents submit a bankruptcy application without understanding the issue, they are not able to exempt the dwelling from administration by the trustee. Except if they can pay off the trustee a sum equivalent to the higher of the home equity or the amount of money they owe (either straight to the Chapter 7 trustee or in installments to a Chapter 13 trustee,) the trustee will put the home up for sale to pay back the lenders. Strangely enough, quite often, the parents might have been in a position to exempt the house and take it without any problems through a bankruptcy should they have kept the title or had reclaimed the title prior to filing.

Even good faith buyers of property that are the receivers of unsavory transfers are only protected in part by the law in the USA. As outlined in the Bankruptcy Code, they are able to maintain the transfer to the extent of the worth they offered for it, this means that they could relinquish most of the gain of their deal although they do not have any information that the move to them is a fraud.

Fraudulent Transfer and Leveraged Buyout

Fraudulent transfers frequently take place in conjunction with leveraged buyouts (LBOs), in which the management/owners of a faltering company forces the business to take out a loan on its assets and then use the funds to buy the management/owner’s stock at very high prices. The collectors of the corporation will not have any unencumbered assets from where to collect their outstanding debts. LBOs are either deliberate or constructive fraudulent transfers, or even both, based on how obvious the company is damaged financially at the time the transaction is finished.

Even though all LBOs aren’t fraudulent transfers, it raises a red flag when, following an LBO, the corporation is unable to repay its creditors.

Fraudulent Transfer Liability “point in time”

Fraudulent transfer liability will usually switch on the financial situation of the debtor at a specific time in the past. This assessment has traditionally demanded “dueling” expert testimony from the defendants and plaintiffs, which usually resulted in a costly procedure and unreliable and erratic outcomes. Not too long ago, U.S. courts and scholars created market-based techniques to attempt to streamline the evaluation of constructive fraud, and the courts are focusing more and more on these market-based approaches.

Contact Our Debt Collection Lawyer

Do you think a debtor is fraudulently transferring real estate or assets to evade repaying your debts or judgments? You need to get in touch with our debt collection attorney today to make sure to end the transfer and stop future transfers. Contact us by phone: (888) 288-1881.



For new business, please call (813) 288-1881 Ext. 247

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