What is a Fraudulent Transfer and How do I Collect?
There are times when a person or company may try to avoid payment of a debt or potential debt by fraudulently transferring property to family, friends or other third parties. This is sometimes referred to as an attempt to become “judgment proof.” If you are a creditor of the person or company, can
Fraudulent TransfersThe Uniform Fraudulent Transfer Act ("UFTA") provides two primary tests for determining when a transfer is "fraudulent." A transfer is fraudulent under the UFTA if the debtor made the transfer with an actual intent to hinder, delay or defraud any creditor. In considering the intent of the debtor, a variety of factors may be considered, such as: o Whether the transfer was to an "insider," such as a family member o Whether the debtor kept possession or control of the property after the transfer o Whether the transfer was concealed or hidden o Whether transfer occurred shortly before or shortly after a substantial debt was incurred o Whether the debtor had been sued or threatened with a suit before the transfer was made o Whether the transfer was of substantially all of the debtor's assets o Whether debtor received reasonably equivalent value in exchange for the property
Creditor's RightsIf a transfer is fraudulent under either of the above tests, the creditor may file a lawsuit to set aside the transfer to satisfy the creditor's claim, and obtain a judgment against the transferee of the asset. The judgment is limited to the lesser of the amount necessary to satisfy the creditor's claim, or the asset's value when the fraudulent transfer was made. A creditor may also file a lawsuit to establish a lien against the property fraudulently transferred, or for a court order preventing further transfer of the property or any proceeds.
Good Faith TransfereesA transfer that would otherwise be capable of being set aside (voided) for fraud may not be set aside against a person who took the property in good faith and for a reasonably equivalent value. "Good faith" means the transferee did not actively participate or collude with the debtor in any fraudulent scheme.
ConclusionIf you have a judgment, you need to act immediately to protect the potentially collectible assets. Unfortunately, fraudulent transfers occur all too frequently. There are many options available to people harmed by fraudulent transfers. One of the key factors is the ability to go after the transferees who assisted or conspired with the debtor to avoid payments to you!