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Asset Protection – Avoiding the Fraudulent Transfer


Most every lawsuit has two phases: obtaining a judgment and collecting on the judgment. When an individual loses a lawsuit or is threatened with a lawsuit one of their first thoughts is how to shield their assets so as to prevent collection. Common actions include transferring money to a spouse or other relative, selling an asset, or titling the asset in the name of a new business entity.  While such actions do make collection more difficult, they are also violations of the Florida Uniform Fraudulent Transfer Act (FUFTA).
Under FUFTA, a fraudulent conveyance is a transaction by which the owner of property places lands or good beyond the reach of creditors. What is important to note is that a “creditor” is not restricted to someone with a judgment. Creditor includes anything with a “claim” or “right to payment” whether or not that right has been reduced to a judgment.
In determining whether a conveyance was done with the intent to commit fraud, a court will look to several factors which include the following:
1.       Whether the transfer as to an insider such as family or friends.
2.       Whether the debtor actually retained control or possession of the asset.
3.       Whether the transfer was concealed.
4.       Whether a lawsuit had been filed or threatened prior to the transfer.
5.       Whether the transfer consisted of almost all of the debtor’s assets.
6.       Whether the money received in return for the transfer was of reasonable value.
7.       Whether the debtor became insolvent following the transfer.
The more badges of fraud that are present, the more likely a court is to declare the transfer illegal. Once a judge rules that FUFTA was violated the transfer can be undone, a receiver can be appointed to control the property, and/or an injunction can be entered to prevent further transfers. 
The best way to avoid a violation of FUFTA is to protect your assets prior to facing a lawsuit. There are many ways to shield personal assets including creating business entities and establishing trusts. If you are faced with creditor problems, or if you are thinking of starting a business, I encourage you to schedule a consultation in order to fully explore all available legal options.

Posted February 12, 2015