Source: https://www.thecolemanlawfirm.com/asset-protection/fraudulent-transfer-law/
Timestamp: 2018-11-16 01:29:20
Document Index: 236702681

Matched Legal Cases: ['§548', '§544', '§7212', '§ 222', '§726', '§ 222', '§222', '§726', '§726', '§726', '§726', '§726', '§726', '§726', '§726', '§726', '§726', '§726']

Fraudulent transfer or fraudulent conveyance Fraudulent transfer or fraudulent conveyance
The implementation of these techniques may also be impacted by the applicable fraudulent transfer statute. If you need the assistance of an experienced Florida asset protection attorney in North Florida to help you determine if a transfer of an asset constitutes a fraudulent transfer pursuant to Florida law, please call us at 904-448-1969, or toll free at 866-510-9099. We have years of experience helping our clients avoid fraudulent transfer laws.
Fraudulent transfer or fraudulent transfer is not concerned with the relationship of the parties or righting a wrong, but is remedial. It is a tool for collecting money or for executing on a judgment. It is not a procedure for determining the liability of a debtor. The focus is on the solvency of the debtor; that is, the debtor’s ability to satisfy claimants who have already proved their debt. The transfers at issue often are “fraudulent” to third parties outside the particular transaction, and the “wronged” parties may not even be ascertainable at the time of the transfer. The “badges of fraud” associated with a fraudulent transfer are related primarily to whether the debtor, after the transfer, is unable to pay current or future creditors. Conversely, an action to set aside a transfer as fraudulent against creditors is likely to fail despite a showing of actual intent to hinder, delay, or defraud a creditor (the “badges of fraud”) if the transfer has left the debtor with sufficient assets to cover the claims against him.
Consistent with its remedial purpose, fraudulent transfer law seeks to extend a creditor’s reach to assets no longer in the debtor’s possession, and offers numerous specific remedies which may operate against strangers to the creditor-debtor dispute. The UFTA enables a creditor, broadly defined as one holding a claim, to: 1) have the transfer or obligation avoided or annulled to the extent necessary to satisfy the creditor’s claim; 2) obtain an attachment or other provisional remedy against the asset transferred or other property of the transferee; 3) obtain injunctive relief against further disposition by the debtor or a transferee of the asset transferred or other property; 4) have a receiver appointed to take charge of the transferred asset or of other property of the transferee; 5) obtain the entry of a money judgment equal to the lesser of the value of the transferred asset or the amount of the creditor’s claim; 6) obtain other relief as circumstance may require.
In addition to the UFTA, the Bankruptcy Code, §548, allows the trustee in a bankruptcy proceeding to avoid any transfer of a property interest of the debtor, or any obligation incurred by the debtor if the debtor was insolvent on the date such transfer was made or such obligation incurred, and the transfer occurred within one year of filing the bankruptcy petition. Transfers made more than a year before the filing of the bankruptcy petition can be reached upon application of §544(b), which allows the trustee in bankruptcy to avoid a transfer that is voidable under applicable (state statutory) law. Florida’s statute of limitation for application of the Florida Uniform Fraudulent Transfer Act is four years from the date of the transfer or the date the obligation was incurred.
Fraudulent concealment or transfer of property can carry criminal penalties for attorneys as well as clients and third parties under the bankruptcy code. Practitioners who collaborate with a client in criminal activity may risk criminal prosecution under an assortment of other federal statutes. The attorney, or other advisor, should be wary of the Internal Revenue Code which can be used to ensnare such advisors. The omnibus clause of 26 USC §7212(a) which proscribes “corruptly obstructing or impeding” administration of the code has been employed to punish an attorney for setting up business entities to disguise illegal income and could be used to evade tax. United States v. Popkin concerns money laundering but has a fact pattern not unlike what might be involved in a sophisticated asset protection plan. The connection to “corruptly obstructing or impeding administration of the code is somewhat tenuous in Popkin, and suggests that the argument could be used to prosecute more common conveyances. Popkin, however, involved a sting operation where the attorney’s client informed the attorney that he wanted to repatriate drug money, and the attorney suggested the money laundering scheme.
There is no Florida statute that imposes criminal, or even civil liability, on an attorney, or other advisor, who assists a client in the planning and implementation of transfers that may ultimately be determined to be a fraudulent transfer or fraudulent conveyance.
Fraudulent transfers of assets in Florida are governed by Florida’s adaptation of the Uniform Fraudulent Transfer Act, Chapter 726, Florida Statutes (hereinafter “FUFTA”). The transfer of assets that are not exempt from the claims of creditors into assets that are exempt from the claims of creditors, is governed by Florida’s fraudulent conversion statute, §§ 222.29-222.30, Florida Statutes. A claim seeking relief pursuant to FUFTA is a claim arising out of equity, and is not an action at law. Accordingly, none of the creditor, the debtor, or any affected third parties is entitled to a jury trial for the issues raised by the claim.
A fraudulent transfer or fraudulent conveyance as to present or future creditors is defined by FUFTA as: (1) A transfer made or obligation incurred by a debtor is fraudulent as to a creditor, whether the creditor’s claim arose before or after the transfer was made or the obligation was incurred, if the debtor made the transfer or incurred the obligation:
Fla Stat, §726.106. Regarding exemptions, Fla. Stat, § 222.29 states that an exemption from attachment, garnishment, or legal process provided by this chapter is not effective if it results from a fraudulent transfer or conveyance as provided in chapter 726. Regarding conversion, Fla Stat, §222.30(2) adds that any conversion by a debtor of an asset that results in the proceeds of the asset becoming exempt by law from the claims of a creditor of the debtor is a fraudulent asset conversion as to the creditor, whether the creditor’s claim to the asset arose before or after the conversion of the asset, if the debtor made the conversion with the intent to hinder, delay, or defraud the creditor. In construing the above provisions, the Florida Supreme Court has determined that these statutory provisions, allowing creditors to attack fraudulent conversions of assets from non-exempt to exempt, rightfully apply to all statutory exemptions other than the Constitutionally protected homestead exemption.
A creditor is merely a person who “has a claim.” As defined in Fla. Stat., Section 726.102, a “claim” is broadly construed and “means a right to payment, whether or not the right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured.” §726.102(4), Fla. Stat. (2015). Thus, as is universally accepted, as well as settled in Florida, a “claim” under the Act may be maintained even though “contingent” and not yet reduced to judgment. Section 726.105(1) applies to both present and future creditors, regardless of whether the claim arises before or after the transfer occurs. Section 726.106 applies only to present creditors, i.e., those who already have a claim, even if the claim has not been reduced to judgment.
a. Completed Transfer or an Obligation Incurred For a fraudulent transfer to have occurred, there must be a “transfer” of property, or an “obligation incurred.” A transfer is defined by the statute as: “every mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing of or parting with an asset or an interest in an asset, and includes payment of money, release, lease, and creation of a lien or other encumbrance.” Fla. Stat., §726.102(14). A transfer occurs when, with respect to real property: “when the transfer is so far perfected that a good faith purchaser of the asset from the debtor against whom applicable law permits the transfer to be perfected cannot acquire an interest in the asset that is superior to the interest of the transferee.” Fla. Stat., §726.107(1)(a). Where personal property is concerned, a transfer occurs, “when the transfer is so far perfected that a creditor on a simple contract cannot acquire a judicial lien otherwise than under ss. 726.101-726.112 that is superior to the interest of the transferee.” Fla. Stat., §726.107(1)(b). If a particular transfer can be perfected, as set forth in §726.107(1), but has not yet been perfected, then the transfer is deemed to have been made immediately before the commencement of the action by the creditor. Fla. Stat., §726.107(2). If the transfer cannot be perfected as provided in §726.107(1), then the transfer is deemed to have occurred when it is effective as between the debtor and the transferee. Fla. Stat., §726.107(3). A transfer is not made until the debtor has acquired rights in the asset transferred. Fla. Stat., §726.107(4). Under Fla. Stat., §726.107(5). an obligation is incurred:
The UFTA is not available to prohibit or enjoin a transfer before it occurs. The U.S. Supreme Court’s decision in Grupo Mexicano De Desarrolla, S.A., et al v. Alliance Bonde Fund, Inc., resolved a number of debtor-creditor issues. The case involved an action for money damages and a preliminary injunction was sought to prevent a defendant from transferring assets. The plaintiff was an unsecured creditor who had not yet established a judgment. Though the case did not deal directly with the fraudulent transfer statute, the facts and circumstances are similar to a typical fraudulent transfer or fraudulent conveyance case. The majority opinion specifically focused on the legal point of law that a court lacks authority to issue a preliminary injunction preventing a debtor from disposing of the debtor’s assets pending adjudication of the creditor’s claim for money damages. Such a remedy has historically not been available to a court of equity. In Grupo Mexicano, the creditor alleged that the debtor was insolvent, or if not insolvent, was dissipating it’s most significant asset, and by transfer of the asset would “frustrate any judgment” the creditor might obtain. The majority opined, “we suspect there is absolutely nothing new about debtors trying to avoid paying their debts or seeking to favor some creditors over others – or even about their seeking to achieve these ends through ‘sophisticated . . . strategies.’” In footnote 11 of the Grupo Mexicano case, Justice Antonin Scalia observed: “There is nothing whatever wrong with respondents pursuing their own interest. Indeed, the fact that it is entirely proper and entirely predictable is the very premise of the point we are making. This new remedy will promote unregulated competition among the creditors of a struggling debtor.”
Fla. Stat., §726.105(2). A creditor, to establish actual intent, must provide evidence that at least some of the “badges of fraud” are present. Evidence of only one badge of fraud usually is insufficient to establish a transfer was made with actual fraudulent intent. Notwithstanding the requirement of pleading “actual intent,” such a complaint is an action in equity to set aside the fraudulent conveyance, not an action at law for damages arising out of fraud. The fact that a complaint alleges actual intent on the part of the debtor to evade the creditor, does not transform the complaint into an action to recover on the ground of actual fraud. . . . The fraud, such as it is, is only incidental to the right of the creditor to follow the assets of the debtor and obtain satisfaction of the debt. The gravamen of the cause of action . . .is the ordinary right of a creditor to receive payment. This right has been implemented by the protection of legislation concerning the circumstances under which the creditor may avail himself of assets which the debtor has transferred to others.