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Creditors' Rights Litigation in State and Federal Courts
Fraudulent Transfer Litigation
A creditor may assert a fraudulent transfer claim when a debtor transfers its assets with the intent to hinder, delay or defraud its creditors. Fraudulent transfer claims aim to recover assets that were fraudulently transferred such that the debtor’s debt to a creditor can be satisfied.
Kluewer Law P.C. represents creditors in fraudulent transfer litigation matters.
Asserting Fraudulent Transfer Claims
Debtors often attempt to put their assets out of the reach of their creditors in order to evade their debts. Debtors often carry out this process by transferring their assets to closely affiliated third parties.
When a debtor does so, the creditor can assert an action against the recipient of the transfer to satisfy the debt. In other words, if, for example, a corporation incurs a debt, and then transfers its assets to a closely affiliated entity in order to evade the debt, the creditor may bring a fraudulent transfer lawsuit against the debtor’s closely affiliated entity for the amount of the transferred assets.
The creditor then may be able to have the relevant debt satisfied from the transferred assets.
Factors Determining Fraudulent Intent for the Purposes of Intentional Fraudulent Transfers
In order to determine whether the debtor transferred its assets to a third party in order to evade a debt for the purposes of an intentional fraudulent transfer, triers of fact look to whether the “badges of fraud” are present.
The “badges of fraud” are indicators that suggest that a debtor moved its assets in order to evade a debt. The “badges of fraud” aid a trier of fact in determining when a debtor has crossed the line between legitimate asset protection and voidable maneuvering.
The Badges of Fraud
A non-exhaustive list of factors that triers of fact consider to determine whether the requisite “badges of fraud” are present such that a fraudulent transfer has occurred are:
Whether the transfer or obligation was to an insider.
Whether the debtor retained possession or control of the property transferred after the transfer.
Whether the transfer or obligation was disclosed or concealed.
Whether before the transfer was made or obligation was incurred, the debtor had been sued or threatened with suit.
Whether the transfer was of substantially all the debtor's assets.
Whether the debtor absconded.
Whether the debtor removed or concealed assets.
Whether the value of the consideration received by the debtor was reasonably equivalent to the value of the asset transferred or the amount of the obligation incurred.
Whether the debtor was insolvent or became insolvent shortly after the transfer was made or the obligation was incurred.
Whether the transfer occurred shortly before or shortly after a substantial debt was incurred.
Whether the debtor transferred the essential assets of the business to a lienor that transferred the assets to an insider of the debtor.
The Requisite Number of Badges of Fraud
There is no minimum number of factors that are required to demonstrate fraudulent intent and only one or two “badges of fraud” may suffice to find a transfer was made with actual fraudulent intent. The presence of one or more of the “badges of fraud” is evidence from which an inference of actual fraudulent intent may be drawn.
Kluewer Law P.C.
Fraudulent Transfer Attorney
Los Angeles, California, San Francisco, California, Phoenix, Arizona
Kluewer Law P.C. has successfully satisfied numerous large debts after asserting fraudulent transfer actions against third parties closely associated with debtors.
Kluewer Law P.C. is headquartered in Los Angeles, California and represents creditors from all over the country and the world in fraudulent transfer matters throughout California and Arizona.