Fraudulent Transfers In California

By May 15, 2015Blog

When a debtor transfers away his or her assets, or attempts to conceal his or her assets so as to avoid paying creditors, it may constitute a fraudulent transfer.

The Uniform Fraudulent Transfer Act (UFTA) is generally what governs this area of law. Under California law, a fraudulent transfer exists if:

  • a debtor makes a transfer or incurs an obligation with actual intent to hinder, delay or defraud any creditor; or,
  • a debtor receives less than reasonably equivalent value for the transfer or obligation and the debtor is insolvent or is reasonably expected to become insolvent.

There are powerful remedies available to creditors if a debtor has conducted a fraudulent transfer:

  • Under Section 3439.07 of the California Civil Code, a creditor can bring an action to undo the fraudulent transfer, to obtain an attachment against the debtor’s assets, to prevent the debtor from further transfers of assets, to appoint a receiver to oversee and control the debtor’s assets, or to provide other relief a court may find appropriate.

Under bankruptcy law, there are two main types of fraudulent transfers:

  • Actual Fraud. This occurs before a bankruptcy filing and is a transfer done with the intent to “hinder, delay or defraud” creditors. By making the transfer, the person who filed for bankruptcy specifically intended to defraud a person or company to which he or she owed money. Intent can be inferred in a number of different ways.
  • Constructive Fraud. This occurs when a person comes into possession of transferred property and paid less than “reasonably equivalent value” for the transfer when the transferor was insolvent, or the transfer caused the transferor to become insolvent.

If you need guidance in these matters, we at Beverly Hills Law Corp., PC are uniquely qualified to defend against and to collect such judgments. Moreover, we can advise you as to whether or not an action could be a fraudulent transfer.