Fraudulent Transfer (Fraudulent Conveyance)
Definition
A transfer of assets made with intent to hinder, delay, or defraud creditors, or made for less than reasonably equivalent value while the debtor was insolvent. Both actual fraud (intent-based) and constructive fraud (value and insolvency-based) can be reversed.
- Two forms
- Actual fraud (intent) and constructive fraud (value/insolvency)
- Remedy sought
- Reversal (avoidance) of the transfer
- Constructive test
- Less than reasonably equivalent value while insolvent
- Typical context
- Bankruptcy and creditor-claim litigation
Common questions
How does actual fraud differ from constructive fraud in a fraudulent transfer claim?+
Actual fraud requires proving the debtor intended to hinder, delay, or defraud creditors, often shown through badges of fraud such as transfers to insiders or shortly before a claim arose. Constructive fraud needs no intent evidence at all, only that the debtor received less than reasonably equivalent value while insolvent.
What role does a forensic accountant play in a fraudulent transfer case?+
They reconstruct the debtor's asset and cash flows around the transfer date, value what was given up against what was received, and assess solvency at the time, providing the factual basis a trustee or creditor needs to support avoidance.
Related terms
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- Preference Payment
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- UNCITRAL Model Law
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