Fraudulent Transfers

A fraudulent transfer occurs when a debtor either intentionally or unintentionally transfers property to a third party for less than fair value so that his creditors cannot resort to that property for the satisfaction of their debt. "Fraudulent Transfer" is an old Common Law term and is inaccurate. Nowadays it is called an "Avoidable Transfer" because such a transfer can be perfectly innocent with no intent to harm creditors, such as a gift. However, if the debtor did not have a great deal of other property when he made the transfer or gift (i.e. he is "solvent") the Trustee will file an adversary proceeding to recover the property from the recipient on the grounds that because the debtor did not get the fair value of the property in return for the transfer the debtor has less property available to pay something to his creditors who file claims in the Bankruptcy. There are many defenses such as the age of the transfer, the solvency of the Debtor, the amount of liens on the property and whether the recipient actually did part with something of value in return for the property such as the cancellation of a debt.

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