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Fraudulent Transfers Will do More Harm Than Good if You’re a Debtor


When businesses are being pursued for money and the creditors come calling, many may resort to drastic measures. Some of those measures may include trying to hide, sell, transfer or dispose of assets that creditors could get to. But be warned because doing something like that can lead to claims of fraudulent transfers.

Confusion Over Fraudulent Transfers

Fraudulent transfers can be difficult to spot, and businesses that engage in them may not feel like they are doing anything wrong.

The logic to some is that there is nothing illegal about selling things, especially when you need money, and there is nothing fraudulent about either selling or transferring an asset or valuable. This is especially true when there is a history of selling or transferring particular goods, property or assets.

You may be the party trying to avoid creditors, and thus, transferring or selling assets, but you could also be the party trying to collect on a contract or on a judgment, and end up frustrated that a company that once had assets, now suddenly has nothing of value to collect upon.

For creditors, knowing what a fraudulent transfer is can help them collect on judgments or debts that may otherwise have been uncollectable.

What is Considered Fraudulent?

Anything that someone who owes money does to evade creditors or keep them from collecting on a debt, by disposing of assets, is engaging in a  fraudulent transfer. That can be outright selling, but it could also be changing title to property, or just getting rid of property.

On the one hand, to be fraudulent, the debtor must be getting rid of assets or property intentionally. But that can be hard for a creditor seeking to undo a transfer, to prove. So, the law allows a creditor to show other objective factors in order to show a fraudulent transfer.

Looking at Consideration

One objective factor is whether property that was sold, was sold for adequate and fair consideration. Selling a business’ heavy and expensive machinery for $100 is likely just an attempt to evade creditors. This means that parties trying to show a transfer was fraudulent may have to demonstrate the value of the sold or transferred property, to show that what was paid, was wholly inadequate.

Who is Getting the Property?

Just as important as how much property was sold or transferred for, is to whom it was transferred to.

Selling assets or property to “insiders,” will be seen as fraudulent. Insiders are relatives, close friends, or close business associates. It may be companies that have some relationship or association with the debtor company or person.

Creditors that can show fraudulent transfers, may be able to get a judgment against the party receiving the assets or property. Creditors may also be able to undo the transfer, getting the money or property back, to satisfy the debt.

Let us help you with the best way to avoid, or collect on your business debt. Call our Fort Lauderdale business lawyers at Sweeney Law P.A. at 954-440-3993 today.




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