Fraudulent Transfers of Assets

Описание: Interested in what could be considered a fraudulent transfer of assets and why? Watch our new video to learn more!

Hi, I’m Greg Brown. Today we are going to talk about fraudulent transfers of assets and avoidance of debt, and what a creditor can do to protect their interests. Now, when faced with a potential debt such as, a looming judgment or other liability, a person and even a company may try to avoid payment of the debt by transferring assets to family, friends, or other third parties. Now, this is sometimes referred to as an attempt to become “judgment proof.” So, let’s look at California Law. Under the Uniform Fraudulent Transfers Act, or the UFTA, there are two primary tests involved for determining whether a transfer of assets is fraudulent. So, let’s start with the first test. A transfer can be fraudulent under the UFTA, if the transfer was made with an actual intent to hinder, delay, or defraud any creditor. This first test considers such factors as to whether the transfer was going to an insider such as a family member, or whether the debtor kept possessional control of the asset after he or she made the transfer. Whether the transfer occurred shortly before, or shortly after, a substantial debt was incurred. Whether the transfer was for all, or substantially all, of the debtor’s assets. These are examples of just some of the factors that are considered. Fraud may be found when only one or two of the factors are present. But, it may also not be found even if all of the factors are present. Courts use these, and other factors, only as guides in determining whether a transfer may be fraudulent under the UFTA. So, let’s talk about the second test, or second factor. A transfer can also be fraudulent if the debtor made the transfer without receiving reasonable equivalent value in exchange for the assets transferred; and the debtor, 1. Was engaged or about engage in a transaction for which the debtor’s remaining assets would be unreasonably small, or 2. Intended to incur, or should have believed that he or she would incur, debts beyond their ability to repay, or 3. Was insolvent at the time of the transfer, or was made insolvent by the transfer. If a transfer is fraudulent under either of these two tests, a creditor can file a lawsuit, and have the transfer set aside so that assets are again available to the creditor to satisfy the debt. A creditor can also seek to have a judgment entered against the person receiving the fraudulent, or fraudulently transferred assets, or have a lean placed on those assets transferred. So, for more information about fraudulent transfers, or any other business disputes or issues, feel free to give us a call at 714-505-3000 or email us at [email protected]. Thank you.