Once you find yourself faced with legal action, your options for creating an asset protection plan are limited. In order to understand what actions you are still legally permitted to take, you must understand fraudulent transfer laws. In Florida for example, where The Port Law Firm is located, the law states that if a person gives away an asset without receiving equivalent value for this asset, a creditor can argue that the giving away was done in an effort to “… hinder, delay, or defraud the creditor.” In some cases, the creditor is able to have the court undo the transfer and it can be included in any settlement reached between the debtor and creditor.
What Makes a Transfer Fraudulent?
Courts examine your records of credit, assets, and transfer, and determine whether something looks suspicious. According to Ed Port of The Port Law Firm, Florida statutes define a fraudulent transfer as “…debtor’s transfer of legal title to his real or personal property to a third party with the intent to hinder, delay or defraud a present or future creditor.” If something is transferred within four years of a person being sued, courts can return the asset to the debtor, making it a part of the settlement. In bankruptcy court, the time frame constituting a fraudulent transfer is only two years. In both cases, if the asset was transferred in an effort to avoid having it be part of the collection settlement, the transfer can be overturned.
There are exceptions to the fraudulent transfer rule, so not all transfers that move assets out of a creditor’s reach are considered fraudulent. You may have a debt or liability, but you are still permitted to sell property and participate in financial planning. What makes a transfer fraudulent is the intention behind the transfer. In order to determine if the transfer was an attempt to hide an asset from a creditor, the court will consider whether the transfer was made to a family member, whether an effort was made to conceal the transfer, whether a debtor retained control of the asset following the transfer, and whether the transfer created a situation of insolvency for the debtor.
For example, if a person is faced with a lawsuit and he “sells” his home to his sibling, but continues to reside in the home, this would more than likely be ruled a fraudulent transfer. However, if a person had put the home on the real estate market, and moved from the home once a stranger had purchased it, the courts will more than likely view it as a circumstance that just happened to correspond with the lawsuit’s time frame.
Facing Consequences
The Florida court system is allowed to undo asset protection planning that is believed to be fraudulent. When a lawsuit is filed, the plaintiff’s attorneys will uncover information about the debtors assets during the discovery process. If the creditor’s attorney alleges fraudulent transfer, the creditor is permitted to sue the debtor as well as the transferee. If you transferred assets to a friend or family member, this person will be named as a defendant in the lawsuit.
It is important to understand that the act of fraudulent transfer in Florida is not illegal; it is simply able to be overturned. A creditor cannot claim additional damages if a fraudulent transfer has been proven to have occurred. A debtor’s monetary liability cannot be increased if he made an effort too late to protect his assets. In bankruptcy court, the transfer cannot only be overturned, the request for bankruptcy can be refused.
Effect on Asset Protection Planning
Regardless of your concerns surrounding fraudulent transfer, you should still pursue an aggressive asset protection plan. It is within your constitutional rights to protect your property until a legal judgment has been made. If you are involved in a lawsuit, you have nothing to lose by trying to protect your assets. You will face no additional charges if your transfer was found to be fraudulent. However, it is important to plan ahead and understand that if you have assets, you are responsible for protecting them. Your asset protection plan is stronger if it was created long before legal action was ever filed. In order to provide the best protection for your assets regardless of what the future holds, contact an experienced asset protection professional like The Port Law Firm. They will help you establish a protection plan that will put your mind at ease.
This article is for informational purposes only. You should not rely on this article as a legal opinion on any specific facts or circumstances, and you should not act upon this information without seeking professional counsel. Publication of this article and your receipt of this article does not create an attorney-client relationship.
