Fraudulent Conveyance

A debtor may commit a fraudulent conveyance if they attempt to transfer to a third party their real or personal property and (in the transfer) their goal is to delay, defraud or keep a present or future reditor from obtaining the property. Bankruptcy law considers two types of fraudulent transfers.

The first is actual fraud which is the intentional action to defraud Creditors, and the second is called constructive fraud which is the transfer of real or personal property for less than it is worth. If the transfer of real or personal property is made within 1 year of filing a Bankruptcy Petition and the debtor has the intent to keep the creditor from obtaining the property or defrauding the creditor, this is considered actual fraud. Determining actual fraud can be difficult and must be done on a case by case basis.

Courts have outlined specific circumstances where overt actions may have occurred which constitute fraud including 1) the creditor threatened to sue the debtor; 2) a retention of control of the property; 3) a debtor attempted to transfer a substantial portion of their assets to a new corporation; 4) the debtor had a special relationship with the person who receive the transferred property. Constructive fraud can be proven if there was an exchange of property made and the debtor did not receive anything in return or payment that is considered of a "reasonably equivalent value" and the debtor was having difficulty making payments for their debts when the property transfer was completed.