Fraudulent Transfers in Bankruptcy:

Contrary to the name, fraudulent transfers do not have to be intended to be fraudulent at the time they are made. The bankruptcy statute provides that if a transfer was made either

  1. with an intent to hinder, delay, or defraud a creditor or
  2. for which the debtor received less than reasonable value in exchange for the property or money transferred, the court may be able to get the property back from whoever it was transferred to.

For the 2nd ground, receiving less than reasonable consideration, it also must be shown that one of the following conditions are satisfied:

a) that the debtor was insolvent at the time of the transfer. Insolvent means the debtor’s total debts exceeded the debtor’s total assets, excluding assets that are exempt (see separate note on website about exemptions);
b) that the debtor was engaged or about to engage in a business or transaction for which such debtor had insufficient financial resources;
c) that the debtor believed he or she intended to incur debts beyond his or her ability to pay them when they came due; or
d) that the transfer was to or for the benefit of an insider (generally a relative, business partner, or someone with a special relationship with the debtor) under an employment contract and not in the ordinary course of business.

A transfer of a charitable contribution to a qualified religious or charitable organization cannot be recovered unless the contribution exceeded 15% of the debtor’s annual gross income.

Under Federal law the trustee can look back 2 years for recovery of any transfers. However Florida state law would allow the trustee to look back 4 years from the date of the bankruptcy for any fraudulent transfers.

This is a complicated area of law, and if there were any transfers of money, property, or incurring of debt that might be considered within this statute, it should be discussed in detail with counsel.

Michael Barnett, Esq.
Michael Barnett, PA
506 N Armenia Ave.
Tampa, FL 33609-1703