Skip to Content
Menu Toggle

Avoiding Fraudulent Transfers

Under Florida asset protection law, what does avoiding fraudulent transfers entail?

Avoiding fraudulent transfers is a crucial aspect of asset protection law in Florida. It involves the prevention of asset transfers that aim to hinder, delay, or defraud creditors from collecting their rightful dues.

A transfer may be considered fraudulent in two ways: actual fraud and constructive fraud. Actual fraud occurs when the debtor intentionally transfers assets to evade creditors. Constructive fraud, on the other hand, occurs when a debtor transfers assets without receiving reasonably equivalent value in exchange, and the debtor is insolvent or becomes insolvent.

For example, in the case of In re Harwell, 628 F.3d 1312 (11th Cir. 2010), the court found that the debtor had committed actual fraud under Florida law by transferring properties to his wife without any consideration, solely to shield those assets from creditors. As a result, the court set aside the transfer, enabling the creditors to recover the assets.

In the case of In re TOUSA, Inc., 422 B.R. 783 (Bankr. S.D. Fla. 2009), a debtor transferred assets to a joint venture partner in exchange for a loan that did not benefit the debtor’s other creditors. The court held that this constituted constructive fraud under both Florida and federal law, as the debtor was insolvent at the time of the transfer and the joint venture partner did not provide reasonably equivalent value.

To avoid fraudulent transfers, individuals must remain vigilant when transferring assets and consider the potential impact on creditors. By understanding the legal framework surrounding fraudulent transfers in Florida, one can more effectively protect their assets and avoid potential pitfalls.

Need help with a matter relating to avoiding fraudulent transfers? Schedule your consultation today with a top asset protection attorney.

Which asset protection laws and regulations relate to avoiding fraudulent transfers in Florida?

The primary statute addressing fraudulent transfers in Florida is the Florida Uniform Fraudulent Transfer Act (FUFTA), codified in Florida Statutes § 726.101 et seq. This statute guides on identifying and avoiding fraudulent transfers, both actual and constructive, in the context of asset protection.

At the federal level, the Bankruptcy Code, specifically 11 U.S.C. § 548, plays a critical role in addressing fraudulent transfers. This section of the Bankruptcy Code allows trustees to avoid and recover fraudulent transfers made within two years before the bankruptcy filing.

In addition to these primary sources of law, court decisions like In re Harwell and In re TOUSA, Inc. also provide valuable guidance on applying these statutes in specific cases.

What are common issues regarding avoiding fraudulent transfers that lead to asset protection litigation?

The following issues are among the most common in actions regarding avoiding fraudulent transfers in asset protection law matters

  • Identifying the debtor’s intent: Determining whether a debtor intentionally transferred assets to defraud, hinder, or delay creditors can be challenging and often leads to disputes and litigation.
  • Determining reasonably equivalent value: In constructive fraud cases, a key issue is whether the debtor received reasonably equal value in exchange for the transferred assets, which can be subject to interpretation and disagreement.
  • Establishing insolvency: Courts often examine whether a debtor was insolvent at the time of the transfer or became insolvent as a result. However, determining insolvency can be complex, particularly when assets and liabilities are not easily quantifiable.
  • Statute of limitations: Disputes may arise over whether the claimant brought the action within the applicable statute of limitations, as outlined in Florida Statutes § 726.110 and 11 U.S.C. § 548.
  • Transfers involving spouses or family members: Transfers to spouses or family members can attract scrutiny, as they may be perceived as attempts to shield assets from creditors.
  • Successor liability: In cases involving the sale or transfer of a business, disputes may arise over whether the purchaser or transferee assumes the seller’s liability for any fraudulent transfers.

When a set of facts meets the requirements of asset protection litigation, there are many paths a claimant may take. We are value-based attorneys at Jimerson Birr, which means we look at each action with our clients from the point of view of costs and benefits while reducing liability. Then, based on our client’s objectives, we chart a path forward to seek appropriate remedies.

To determine whether your unique situation may necessitate litigation, please contact our office to set up your initial consultation.

What strategies minimize the risk of litigation over avoiding fraudulent transfers?

To minimize the risk of litigation over avoiding fraudulent transfers, one should consider the following strategies:

  • Maintain proper documentation: Ensuring thorough and accurate records of all financial transactions and asset transfers can help demonstrate the legitimacy of such activities and counterclaims of fraudulent intent.
  • Establish clear business purposes: Make sure that any transfers or transactions have a legitimate business purpose and are not solely to defraud creditors.
  • Avoid preferential treatment: Treat all creditors fairly and avoid giving preferential treatment to certain creditors, as this could raise suspicions of fraudulent intent.
  • Monitor financial health: Regularly monitor the business’s financial health to prevent insolvency or the appearance of insolvency, which could trigger claims of fraudulent transfers.
  • Obtain independent valuations: When transferring assets, obtain independent valuations to ensure that the asset exchange is for reasonably equivalent value.
  • Utilize legitimate asset protection strategies: Use legitimate asset protection strategies such as establishing trusts, limited liability companies (LLCs), and family limited partnerships (FLPs) that comply with Florida and federal laws.

Frequently Asked Questions

  1. What constitutes a fraudulent transfer under Florida law?
    Florida law defines a fraudulent transfer as a transaction in which the debtor intentionally transfers assets to hinder, delay, or defraud creditors or when the debtor does not receive reasonably equivalent value in exchange for the assets. The debtor is or becomes insolvent as a result.
  2. How long does a creditor have to challenge a fraudulent transfer in Florida?
    Under Florida Statutes § 726.110, a creditor has four years from the date of the alleged fraudulent transfer or one year from the date the transfer was or could have been reasonably discovered to bring a claim under the Florida Uniform Fraudulent Transfer Act (FUFTA).
  3. What remedies are available to creditors in cases involving fraudulent transfers?
    Creditors may seek various remedies in cases involving fraudulent transfers, including avoiding the transfer, obtaining an injunction against further transfers, attaching the transferred assets, and recovering monetary damages. Additionally, in a bankruptcy context, the trustee can recover fraudulent transfers under 11 U.S.C. § 548 for the benefit of the bankruptcy estate.

Have more questions about an asset protection-related situation?

Crucially, this overview of avoiding fraudulent transfers does not begin to cover all the laws implicated by this issue or the factors that may compel the application of such laws. Every case is unique, and the laws can produce different outcomes depending on the individual circumstances.

Jimerson Birr attorneys guide our clients to help make informed decisions while ensuring their rights are respected and protected. Our lawyers are highly trained and experienced in the nuances of the law, so they can accurately interpret statutes and case law and holistically prepare individuals or companies for their legal endeavors. Through this intense personal investment and advocacy, our lawyers will help resolve the issue’s complicated legal problems efficiently and effectively.

Having a Jimerson Birr attorney on your side means securing a team of seasoned, multi-dimensional, cross-functional legal professionals. Whether it is a transaction, an operational issue, a regulatory challenge, or a contested legal predicament that may require court intervention, we remain a tireless advocate every step of the way. Being a value-added law firm means putting the client at the forefront of everything we do. We use our experience to help our clients navigate even the most complex problems and come out the other side triumphant.

If you want to understand your case, the merits of your claim or defense, potential monetary awards, or the amount of exposure you face, you should speak with a qualified Jimerson Birr lawyer. Our experienced team of attorneys is here to help. Call Jimerson Birr at (904) 389-0050 or use the contact form to set up a consultation.

Jimerson Customer Service

We live by our 7 Superior Service Commitments

  • Conferring Client-Defined Value
  • Efficient and Cost-Effective
  • Accessibility
  • Delivering an Experience While Delivering Results
  • Meaningful and Enduring Partnership
  • Exceptional Communication Based Upon Listening
  • Accountability to Goals
Learn more
Jimersonfirm Awards
Jimersonfirm Awards
Jimersonfirm Awards
Jimersonfirm Awards
Jimersonfirm Awards
Jimersonfirm Awards
Jimersonfirm Awards
we’re here to help

Contact Us

Jimerson Birr