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What Is a Fraudulent Transfer?

A fraudulent transfer is also referred to as fraudulent conveyance. This means a person transfers a property or money with aim of swindling or delaying a creditor. An example of this is when an individual transfers his bank account to a relative and putting that particular account under the name of that relative. The ownership, however, remains with the person who originally opened that bank account.

Debtors may engage in a fraudulent transfer in an effort to protect his or her assets and to save himself from further trouble. Those who face huge debts would normally transfer the assets to a relative or a so-called insider to show that he or she has nothing more to pay to the creditors.

The concept of fraudulent conveyance can be traced to Twyne’s Case. This case involved an English farmer who tried to sell his sheep to a certain Twyne as a way to escape from his creditors. However despite his action, the man remained the owner of the sheep.

Basically, there are two types of fraudulent transfer. These are the intentional and the constructive. The intentional kind of transfer is initiated by a debtor with the aim of defrauding or delaying his or her creditors.

A constructive fraudulent transfer, on the other hand, is an act initiated by a debtor to transfer his property without getting any equivalent value. This is regardless whether a debtor is insolvent at that time of transfer or becomes insolvent later on. In this situation, the intention to defraud does not exist.

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