Fraudulent Conveyances

Question 1

What are the two types of conveyances that can be attacked under fraudulent conveyance law in VA?

Answer 1

(1) Actual fraud–made with intent to frustrate, hinder, or delay creditors
(2) Voluntary conveyance–made for less than fair value while debtor is insolvent or makes debtor insolvent

Question 2

What are the two types of creditors in the context of fraudulent conveyances?

Answer 2

(1) Present creditors–those whose claims arose before the transfer being attacked
* Can attack voluntary or fraudulent conveyances

(2) Future creditors–creditors whose claims arose after the transfer was made
* Can only attack conveyances made with actual fraud

Question 3

To whom does fraudulent conveyance law exist to benefit?

Answer 3

• Creditors
• A debtor cannot use it to attack regretted transfers, even if a creditor might attack those transfers

Question 4

What if the transferee took the property with knowledge that it was made with the intent to hinder creditors?

Answer 4

They have no recourse against the creditor, but may be able to sue the debtor

Question 5

What if the transferee who took the property was a BFP?

Answer 5

They keep the property–creditor must go after the money that purchaser paid to the debtor

Question 6

What if the transferee who took the property did so with no notice, but paid less than fair consideration?

Answer 6

Purchaser must give up the property but gets a lien on it for the amount paid to the debtor (plus improvements)

Question 7

How do you show that a transfer was made with the intent to frustrate, hinder, or delay creditors?

Answer 7

Look for “badges of fraud” from which you can infer intent:
* Renouncing a bequest under a will
* Transfers between spouses
* Transfers in consideration for support (e.g., “take care of X until she dies”)
* Lack of consideration
* Transferor retaining possession of property

Question 8

What are the procedures for setting aside conveyances?

Answer 8

(1) Judgment creditor–motion to set aside transfer
* Proof of fraudulent intent must be clear, cogent, and convincing

(2) Bill in equity
* If the property is properly described, the lien attaches as of the date the bill was filed
* Notice of lis pendens will protect general creditor against BFP
* Grantee must be joined in the action to set aside the transfer