There are many different scenarios that can lead to a fraudulent transfer lawsuit (also known as a Fraudulent Conveyance action).
Maybe you innocently bought something you thought was a great deal, or you received a gift from a friend or relative who later filed bankruptcy. Now, months later, you have a fraudulent transfer lawsuit brought on by the trustee of the bankruptcy case
[Read more about the role of the Trustee]
So What Happened?
Unfortunately, regardless of your innocence or good intentions, you now have to defend yourself in a fraudulent transfer lawsuit. Your first step should be to talk to a skilled California attorney who is experienced in this type of litigation.
Transfers of property – anything of value, including money, personal property or real property – may result in a fraudulent transfer lawsuit. If you are the recipient of goods or property from someone who later files for bankruptcy, you could now be sued by the trustee of the transferor’s bankruptcy case.
In California, there are two types of fraudulent transfers in bankruptcy.
“Actual Fraud” is a transfer made before a bankruptcy filing with the intent to “hinder, delay or defraud” creditors. In other words, the Court will need to determine that, by making the transfer, the person who filed for bankruptcy actually intended to defraud a person or company to which he owed money. Intent can be inferred in a number of different ways, and the Court will be looking at any facts that make the transaction out of the ordinary or suspicious.
The other type of fraudulent transfer falls under the heading of “Constructive Fraud.” This type of fraudulent conveyance can be shown if you came into possession of transferred property and paid less than “reasonably equivalent value” for the transfer when the transferor was insolvent, or the transfer caused the transferor to become insolvent. So, if you bought your cousin’s car for $5,000 and the bankruptcy trustee thinks it was worth $15,000, the purchase may fall under the “constructive fraud” definition. Your innocent purchase or goodwill gesture to help a down-and-out relative may result in a lawsuit!
No matter what type of fraudulent transfer is claimed, you may be liable for your part. If you’ve been sued, your best line of defense is an experienced fraudulent conveyance attorney. Without proper representation, you may lose the asset and whatever you paid for the asset. That’s right – your cousin’s car and the $5,000 paid amount will likely be lost in this lawsuit. In addition, you will likely be liable for pre-judgment interest from as far back as the date of the transfer. This means that you could owe thousands of dollars in interest.
Speaking with a trusted and knowledgeable fraudulent conveyance attorney is the best line of defense against what could be a very expensive judgment.
Do not assume that the bankruptcy attorney handling this case will handle your fraudulent conveyance lawsuit, as well. In fact, many bankruptcy attorneys will not touch a fraudulent transfer suit because the laws regarding fraudulent transfers are complex and technical. At Royzman Law Firm, we know this area of law well and are here to help. If you have been sued for fraudulent transfer, you must act quickly to try to avoid some of the harsh consequences.
Contact Royzman Law Firm today to discuss the details of your California fraudulent conveyance case. We have the experience needed to properly assess the strength of the trustee’s fraudulent transfer claim and the legal defenses you have. Whether the best option in your case is to aggressively defend the suit or negotiate a settlement with the trustee, we will make sure you obtain the best possible outcome. Call Royzman Law Firm at 310.954.8503 or contact us online to schedule a consultation.
Please note that the materials appearing on this blog are provided for informational use only, and are in no way intended to constitute legal advice or the opinions of this law firm or any of its attorneys. The law is constantly changing, and the materials appearing on this blog are not guaranteed to be correct, complete, or up-to-date. You should not act or rely upon any information appearing on this blog without consulting a qualified attorney for individual advice regarding your own unique situation. Transmission of information through this blog or this website does not create any attorney-client relationship between you and Royzman Law Firm, Inc. or Natella Royzman, Esq.