Texas Fraudulent Transfer Act
Texas Uniform Fraudulent Transfer Act
Fraudulent Transfer Texas
Debtors sometimes try to avoid debt by transferring assets to a third party, which can make it more difficult for a creditor to collect what they are owed. For a business that extends a line of credit to a customer that does this, it can negatively affect the business’s bottom line. These kinds of transfers are illegal in Texas for a number of reasons.
Creditors in Texas have several remedies for when a debtor engages in fraudulent transfers. An experienced lawyer can give you more information about the Texas uniform fraudulent transfer act.
Meaning Of Fraudulent Conveyance
Fraudulent Transfers Act
The Texas Uniform Fraudulent Transfer Act (TUFTA) defines “transfer” as:
“every mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing of or parting with an asset or an interest in an asset, and included payment of money, release, lease, and creation of a lien or other encumbrance.”[2] An asset for these purposes is any property of a debtor, but excludes (1) property encumbered by a valid lien; (2) property to the extent it is generally exempt under bankruptcy law; and (3) an interest in property held in tenancy by the entireties to the extent it is not subject to a claim against a tenant under the law of another jurisdiction.[3] “
TUFTA defines a “fraudulent transfer” under Section 24.005(a):
“a transfer is fraudulent if the debtor made the transfer (1) with actual intent to hinder, delay, or defraud a creditor or (2) without receiving a reasonably equivalent value in exchange for the transfer, assuming the debtor satisfies one of two conditions.[4] The first condition is that the debtor engaged in a transaction in which the debtor’s remaining assets are unreasonably small in relation to the transaction.[5] Alternatively, the second condition is that the debtor incurred or reasonably believed he or she would incur debts that the debtor would not be able to repay.[6] In addition, under Section 24.006, a fraudulent transfer also includes one made to an insider while a debtor is insolvent.[7]”
How Courts Determine Fraudulent Transfers
What Is Fraudulent Conveyance
The court will consider whether the transfer was made in order to prevent the judgment creditor from collecting what the debtor owes them. Whether or not the debtor received an equivalent value for transferring the asset can also determine the court’s decision. Other factors the court may consider include:
- Whether the debtor has been threatened with a lawsuit or sued in the past
- The debtor concealed the assets or concealed the transfer of those assets
- The debtor transferred all their assets
- The debtor transferred the assets shortly before or after they incurred the debt
- The debtor still remained in control of the asset after the transfer
- The debtor transferred the property to an insider such as a family member
Remedies For Fraudulent Transfer
Fraudulent Transfer Definition
Creditors that suspect fraudulent transfer can obtain relief as described in Business & Commerce Code Section 24.008(a). This includes:
- avoidance of the transfer or obligation to the extent necessary to satisfy the creditor’s claim;
- an injunction against further disposition by the debtor or a transferee, or both, of the asset transferred or of other property;
- appointment of a receiver to take charge of the asset transferred or of other property of the transferee
