When faced with claims from creditors, occasionally people and businesses will attempt to prevent collection on these claims by transferring their assets to another person or business entity. These types of conveyances are called fraudulent conveyances and the law provides recourse for a creditor to chase the assets that were fraudulently conveyed. We are experienced at recognizing and uncovering these fraudulent conveyances as part of our efforts to collect on our clients’ claims.

During the bankruptcy process, the appointed bankruptcy trustee is responsible for overseeing the bankruptcy estate and creditor claims.  When the bankruptcy trustee determines that the debtor improperly transferred an asset to a third-party in order to avoid the asset going to its creditors, the bankruptcy trustee may avoid that transfer as a fraudulent conveyance. In addition, fraudulent conveyances may arise outside of a bankruptcy, Pursuant to Section 548 of the Bankruptcy Code, a transfer by the debtor is fraudulent if made within two years of the bankruptcy filing, with the actual intent to “hinder, delay, or defraud” a creditor.  Under the Ohio Uniform Fraudulent Transfer Act, in determining whether the debtor acted with actual intent to hinder, delay, or defraud, the court considers a number of factors including whether the transfer was made to an insider, whether the debtor retained possession of the property even after the transfer, whether the transfer was concealed, whether the debtor made the transfer after being threatened with a lawsuit, whether the transfer was substantially all of the debtor’s assets, whether the debtor has absconded, whether the debtor concealed assets, whether the consideration received by the debtor was reasonably equivalent to the value of the transferred asset, whether the debtor was insolvent at the time, whether the transfer happened shortly before or after a substantial debt was incurred, and whether the assets were essential and ultimately ended up being transferred to an insider. 

Conveyances made by the debtor within four years of filing for bankruptcy or litigation may also be considered fraudulent if the debtor received less than they should have in the exchange and other conditions were present, such as the debtor was insolvent or the transfer was made for the benefit of an insider.  The focus of the inquiry is whether the value that the debtor received was reasonably equivalent to the transferred asset. 

Creditors who are told that one of their debtors has filed for bankruptcy and does not have assets to pay their claim and creditors that suspect that a fraudulent conveyance has taken place, should consult legal counsel as the creditor may have avenues for setting aside earlier transfers that meet the requirements of a fraudulent conveyance under the Bankruptcy Code or the Ohio Uniform Fraudulent Transfer Act.   

Dworken & Bernstein’s attorneys have experience defending debtors, as well as representing creditors seeking to recover fraudulent conveyances. We can help a creditor who claim that a debtor wrongfully conveyed property to another party, leaving the creditor unpaid.  We can also help clients defend fraudulent conveyance claims, showing that the conveyance was permissible under the law.

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