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Understanding Fraudulent Transfers in California

fraud.jpgDebtors are not allowed to 'give away' their assets in order to protect those assets from creditors. This is an issue in many bankruptcy cases, as some debtors try to find ways around the system. It is critical that creditors are fairly protected from any fraudulent transfers. Fortunately, California law offers creditors vital protections under the Uniform Fraudulent Transfer Act (UFTA). If you are a creditor in California, and you believe that a debtor has fraudulently transferred assets that you had a legal claim to, you need to contact an experienced San Jose creditors' rights lawyer attorney as soon as possible.

Actual Fraud

Fraudulent conveyances come in two basic forms. The first is actual fraud. In order to prove that you have been a victim of actual fraud, you will need to prove that the alleged fraud occurred with specific intent. Often, in these cases, assets will be transferred to a close friend or family member as a clear attempt to keep them out of the hands of the creditor. Of course, in this situation, a creditor has a legally valid claim to the fraudulently conveyed assets. To prove actual fraud, California courts will look to answer the following questions:

  • Was the transfer in question disclosed?
  • What percentage of the debtor's assets were transferred?
  • What consideration was given in exchange for the transfer?
  • When, in relation to the claim by the creditor, was the transfer made?

Constructive Fraud

In the event that actual fraud did not occur, or if specific intent simply cannot be established, creditors are not out of options. There is a second type of fraudulent transfer, known as constructive fraud, which is generally easier to prove. This type of fraud does not have an intent element. Instead, when assessing a conveyance for constructive fraud, California courts will only consider the underlying economic circumstances of the transaction in question. When a transaction occurs under certain circumstances, and the transaction does not make basic economic sense on its face, it can be deemed constructive fraud. For example, if an insolvent debtor transferred away a valuable asset in return for something far below fair market value, an affected creditor may be able to prevail in a constructive fraud claim.

Fraudulent Conveyances: What Remedies Are Available?

If a transfer has been determined to be fraudulent under the UFTA, impacted creditors have remedies available. A creditor may be able to get a judgment against the transferred asset. Further, a creditor may also be able to get the fraudulent transfer voided. Finally, a creditor can seek injunctive relief to avoid any further fraudulent conveyances by the debtor until all debt issues are fully and fairly resolved.

Were Your Creditors' Rights Violated?

Our skilled San Jose creditors' rights lawyers can help. At Diemer, Whitman & Cardosi, LLP, we have helped protect the legal rights and financial interests of creditors across Northern California. To learn more about what our team can do for you, please reach out to us today at 408-971-6270 to set up a free review of your case. We represent creditors throughout the Bay Area and Silicon Valley.

Source:

https://www.law.cornell.edu/uscode/text/11/548

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  • Santa Clara County Bar Association | 1917
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  • The State Bar of California
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