FRAUDULENT CONVEYANCES Nassau Academy of Law CLE Live ...

Fraudulent TranferencesThe term “fraudulent transfer”, when used in debtor/creditor law, does notnecessarily implicate common law fraud. A fraudulent transfer is one in which the debtortransfers property fair less than reasonably equivalent value at the time they are insolventor are left insolvent by the transfer or have transferred the property to hinder delay ordefraud creditors. It is a tool used to protect creditors form the efforts of debtors to hideassets from the reach of their creditors. No intent of wrongdoing is required althoughthere are consequences if intent is shown.States have adopted either the Uniform Fraudulent Transference Act (“UFTA”,adopted by most states) or the Uniform Fraudulent Conveyance Act (“UFCA”)NY has adopted the UFCA6 year statute of LimitationsActual Fraud / Constructive fraudAlthough fraudulent transfers also include transfers made by a debtor with intentto delay, hinder, or defraud creditors, i.e., actual fraud, the most common use of thefraudulent transfer statutes is the constructive fraud provision promulgated in order toprotect creditors form the disposition of property by the debtor without fair return to thedebtor with the effect of putting those assets out of the reach of the creditor. An action torecover a fraudulent transfer can be brought under State Law or under the BankruptcyCode.Actual Fraud FTA gives badges of Fraud, FCA does notBadges of fraud include:• Lack or inadequacy of consideration• Family, friendship or close relationship with transferee• Retention of control, possession, benefit or use of property• Financial condition of party beg=fore and after the transaction• Existence or cumulative effect of pattern or series of transactions or course of conduct afterincurring debt, onset of financial difficulties, or pendency or threat of suits by creditors• General chronology of events and transactions under inquiryo In re Borriello, 2005, 329B.R. 367Attorneys fees awarded Under UFCA if actual intent to defraud shownFraudulent intent may be indicated by the lack or inadequacy of value given for property.In Re Borriello, 2005 329 B.R. 367