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From Lawletter No. 173 Fraudulent property transfers can result in criminal charges Think twice before you transfer property out of your name solely for the purpose of keeping it away from creditors. California law forbids such a transfer, labeling it a "fraudulent conveyance." Creditors can sue to have such transfers of property voided. In such a case, they may be able to seize the property for payment of the transferor's debts. If the debtor files bankruptcy after disposing of most or all of his property through such "fraudulent" transfers, the bankruptcy court can declare the transactions invalid. In such a case, the property may be used to satisfy the bankrupt's debts. In many cases, creditors have not vigorously pursued property that they suspect was fraudulently transferred, unless the property was unusually valuable and the debt unusually large. However, some banks and finance companies are now reporting such suspected transactions to the local district attorney. A fraudulent transfer is a crime under California law. If the property so transferred is worth more than $100, the offense is a felony. Rule: A transfer is considered to be a "fraudulent conveyance" if it is transferred for "less than adequate consideration" (i.e., a payment or other compensation for substantially less that the property's actual value) with the intent of hindering or defrauding creditors. Recommended procedures: The laws governing the rights of creditors and debtors are complex. Before you consider any such transfer, get legal advice. |
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