fraudulent conveyances

Question 1

what is a fraudulent conveyance?

what can creditor get a lien on as a result of perceived fraud

Answer 1

Fraudulent conveyance law allows creditors to obtain liens on
(1) property that the debtor transferred to hinder, delay, or defraud creditors [need to show intent]

[unless conveyance is to BFP for value who paid fair consideration and took without notice - creditor cannot obtain lein, but may go after the transferor’s money]

and

(2) voluntary gifts, or conveyances made for less than FMV made by the debtor while they were insolvent or that render them insolvent.

– note that transfers between indebted and non-indebted spouses are presumed fraudulent and are voidable at the suit of either existing or future creditors

– exceptions to the spouse thing:
(a) non debtor spouse shows she took without notice, OR
(b) she gave consideration for the transfer, OR
(c) the property was held by tenancy by the entirety [can only be subject to lien by joint creditors]

Question 2

how to show intent to hinder, delay, or defraud?

Answer 2

“badges of fraud” establish a rebuttable presumption of intent to defraud.

(1) lack of consideration

(2) transferor retaining possession of the property.

(3) transfers between spouses

(4) transfers in consideration of support (Mom gives X blackacre in return for X’s promise to care for Mom)

(5) renouncing a bequest under a will

Question 3

who may get a lien on fraudulent or voluntary conveyances

Answer 3

Present creditors [claims arose before transfer]
– can attack voluntary or fraudulent conveyances [can show mere constructive fraud]

future creditors [claims arose after transfer]
- they can attack only conveyances made with actual fraud, rather than just presumption of fraud

Question 4

actual fraud

Answer 4

conveyance took place for less than fair market value and insolvency

Question 5

distinguish fraudulent transfer from preference

Answer 5

a preference under VA law is fine .

a preference is a transfer of property to a creditor to satisfy a debt, which prevents other creditors from satisfying debts.

these are not made with intent to hinder creditors and are not made while being insolvent.

these are made to proffer one creditor over another

the only way to attack is federal bankruptcy law

Question 6

what fraudulent conveyances cannot be attacked

Answer 6

conveyances to bona fide purchasers for value [paid full value and took without notice]