Fraudulent conveyances in bankruptcy

January 10, 2010

Some transfers of assets that would be perfectly legal and valid outside the context of bankruptcy are invalid when bankruptcy is involved. A bankruptcy trustee has the power to invalidate transfers that are deemed to be fraudulent conveyances.

Fraudulent conveyances, or fraudulent transfers as they are sometimes called, are an attempt on the part of the debtor to hide an asset before filing for bankruptcy by giving it to someone, such as a relative, free of charge or at an unreasonably low price.

There are two types of fraudulent conveyances: actual fraud and constructive fraud. Cases of actual fraud require proof that the debtor acted with the intent to hinder or defraud a creditor.

With constructive fraud, the debtor’s intention behind a transfer is irrelevant. A transfer will be considered constructive fraud if two conditions are met: the debtor received less than a reasonably equivalent value in exchange for their asset and the debtor was unable to pay their debts at the time the transfer was made or as a result of the transfer.

If you file for bankruptcy, any transfer of your assets that you make within 90 days of filing for bankruptcy, or within one year if a relative or business associate is involved, will be carefully scrutinized by the court.

To receive free legal advice on transferring your assets in the context of bankruptcy, contact the Texas bankruptcy lawyers of Fears | Nachawati today. Simply email us or phone us toll free at 1.866.705.7584.

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