Fraudulent Conveyance: How Shady Transfers Can Cost You Everything

Episode Description / Show Notes: 

• Learn what a fraudulent conveyance really means in legal and investigative terms.
• Discover how debtors may attempt to hide assets to avoid paying creditors.
• Understand that we are not giving legal advice—always consult a qualified attorney.
• Examples of fraudulent conveyance include:
  • A debtor transferring real estate, vehicles, or cash out of their name before or during a lawsuit.
  • A husband quitclaiming a shared property to his wife during litigation.
  • Someone transferring large sums of money to a relative’s bank account with no clear return of value.
• A court must declare a transfer as a fraudulent conveyance—you can’t just claim it based on suspicion.
• Creditors must present evidence such as:
  • Real estate deeds
  • Corporate filings
  • Certified documents showing asset transfers
• The court will only act when you file a proper legal argument—this is not automatic.
• You may need to prove the transfer had no fair exchange of value and was intended to shield assets.
• In many cases, attorneys may use a legal concept called a constructive trust—this means the person receiving the asset could be viewed as holding it in trust for the real owner (the debtor).
• If you suspect a fraudulent conveyance, document it early and consult a legal professional to possibly recover the hidden assets.

What is The Expert Podcast?

The Expert Podcast brings you firsthand narratives from experts across diverse industries, including private investigators, general contractors and builders, insurance agencies, vehicle specialists, lawyers, and many others.

So what constitutes a fraudulent conveyance? Fraudulent conveyance is a legal term used by attorneys or in the court to identify payments or transfers or hidden assets that were sent away from somebody who's trying to hide assets. Now remember, we're not attorneys, we're not giving you legal advice, but we're telling you what we've seen in working on cases in the past so you can apply that maybe to your case or get with a qualified attorney to get proper legal advice.

But that being said, a fraudulent conveyance is when a party who is a debtor—who owes money or is about to owe money in a lawsuit—takes some asset, whether they're cash, real estate, vehicles, corporate assets, intellectual property, UCCs, any type of asset, and transfers them out of their name, out of their vesting or titling, for the purpose of keeping it or shielding it from a creditor.

For example, if a husband and wife own a home together and the husband is being sued by somebody, during that lawsuit or just prior to the lawsuit, if that husband quitclaim deeds their property to the wife, then that could be construed as a fraudulent conveyance. Look, you put this property in somebody else's name to try to shield it or avoid it from being an asset.

Let's suppose somebody owes money to a judgment and they have two hundred thousand dollars in the bank, and they take 150,000 and they put it in a new bank account in their daughter's name—well, that's a fraudulent conveyance in most cases because it's a way to shield that money unless you can show what that transfer was for and it was a value-for-value proposition. Many times, the court is going to say it's a fraudulent conveyance.

Now keep in mind, the court doesn't do this automatically. If you are a creditor and you have a debtor or somebody that owes you money or somebody that you're suing, you actually have to make the argument and filing with the court to have this be declared and judged to be a fraudulent conveyance. The court's not going to do it by itself. You can't make up the definition and say, "this is a fraudulent conveyance." A court has to confirm this.

So you're going to have to bring your evidence, bring your documentation—maybe from an investigation that you've done, maybe from collecting certified documents from various transfers, maybe real estate deeds, maybe corporate documents—showing that this debtor conveyed this property and that there was no material value returned to have a judge sign this off. Because if you could just do it based on your say-so, then everybody would do it for every conveyance.

So you have to have an arbitrary—or I'm sorry, unrelated—third party like a court sign off on it to show that this is a fraudulent conveyance. So if you have a debt owed to you by a debtor and you have a judgment or an amount owed, make sure that if you see assets being transferred away—vehicles, real estate, money in the bank—that you catch it early and have it be declared a fraudulent conveyance so that you don't have all of the assets you can claim be put in other people's names.

And if the court signs off on it, now you can go and collect those assets from the third party. You can't do it just on your say-so because you see money going away—you have to have a court sign off on it. Many times, the legal theory that an attorney will use—and most of the investigations we do are for attorneys—is to call that what's called a constructive trust, where even though they didn't formally set up a trust to put money in somebody else's name, that the other person in effect is a trustee for the money belonging to your debtor.

So if you have something you think might be a fraudulent conveyance, get with a qualified attorney. Get with somebody who can give you proper legal advice and find out if the suspicious transaction does qualify as a fraudulent conveyance and how you can have that documented to get that money back in your pocket.