Fraudulent , or fraud transfers , is an attempt to avoid debt by transferring money to other people or companies. In general this is a civil matter, not a criminal, meaning that a person can not go to jail for it, but in some jurisdictions there is potential for criminal prosecution. It is generally treated as a civil cause of the actions that appear in the relationship of the debtor/creditor, especially with reference to the insolvent debtor. The cause of the action is usually carried by the creditor or by the bankruptcy trustee.
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Ikhtisar
Transfers will be fraudulent if made with the intention to impede, suspend or deceive any creditor. So, if the transfer is done with a specific intention to avoid fulfilling certain obligations, then the real intent is there. However, when a debtor prefers to pay one creditor than another, it is not a fraudulent transfer.
There are two types of fraudulent transfers - actual fraud and constructive fraud . Actually fraud usually involves a debtor who as part of an asset protection scheme donates his assets, usually to an "insider", and leaves nothing to pay his creditors. constructive fraud is not related to fraudulent intentions, but rather to the underlying economy of a transaction, if there is less than equivalent value when the debtor is in a depressed financial condition. It is important to note that the real difference between the two different types of fraud is what the debtor's intentions are. For example, where the debtor is only cheaper than it should be or, in a business transaction, the business should stop trading early to maintain capital (see general, incorrectly traded). In a successful lawsuit, the plaintiff is entitled to recover the transferred property or the value of the transfer recipient who has received the gift from the debtor's assets. Subsequent redirects can also be targeted, though they generally have stronger defenses than direct transferee.
Although false transfer legislation originally evolved in the relatively simple agrarian economic context, it is now widely used to challenge complicated modern financial transactions such as debt purchases.
The responsibility of fraudulent transfer will often change the financial condition of the debtor at a certain point in the past. This analysis historically requires expert testimony of "duel" from the plaintiff and the defendant, which often leads to costly and inconsistent and unpredictable results. Courts and scholars have recently developed a market-based approach to try to make this analysis simpler, more consistent in all cases, and more predictable.
Fraud badges
Evidence of real intent is rarely available to creditors because it requires proof of one's inner thoughts. Therefore, lenders often have to rely on indirect evidence of fraud. To prove its true intent, the court has developed a "fraud badge," which, although not conclusive, is considered by the court as an indirect proof of fraud:
- Became bankrupt due to transfer;
- Inadequate or inadequate consideration;
- Family, or insider relationships between the parties;
- Storage of ownership, benefit or use of the property in question;
- The existence of litigation threats;
- The financial situation of the debtor at the time of transfer or after transfer;
- The existence or cumulative effect of a series of transactions following the financial difficulties of the debtor;
- General chronology of events;
- The secret of the transaction in question; and
- Deviation from the usual method or business direction.
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Individual jurisdiction
Australia
Under Australian law, if a transaction is made by a company which subsequently enters into liquidation, and the transaction is performed by the company for the purpose of defeating, suspending or disrupting the creditor's right for 10 years before Day's return, the court may set it aside. The day of reconnection is defined as the day on which the application for the closure of the company is filed, or the date of commencement of liquidation.
United Kingdom
- Fraud Deception 1571
- Insolvency Act 1986 section 423
United States
In Anglo-American law, the Whole Deception doctrine traces its origins back to the Twyne Case, where a British farmer attempts to deceive his creditor by selling his sheep to a man named Twyne, while still having sheep, mark and cut them. In the United States, counterfeit transport or transfers are run by two generally consistent sets of laws. The first is the Uniform Transfer Fraud Act ("UFTA") which has been adopted by all countries except a handful of countries. The second is found in the Federal Bankruptcy Code.
UFTA and the Bankruptcy Code both state that the transfer made by the debtor is a fraud to the creditor if the debtor makes a transfer with "the real intention to impede, delay or deceive" the debtor's creditors.
There are two types of fraudulent transfers. An archetype example is accidental fraudulent transfers. This is a transfer of property made by a debtor with a view to deceiving, inhibiting, or delaying his creditors. The second is constructive cheating transfers. Generally, this happens when the debtor transfers the property without accepting "equivalent value" in exchange for a transfer if the debtor is bankrupt at the time of transfer or becomes bankrupt or abandoned with too little capital to continue business as a result of the transfer. Unlike accidental fraudulent transfers, there is no intention to deceive as necessary.
The Bankruptcy Code authorizes the bankruptcy to recover the fraudulently transferred property for the benefit of all the debtor's creditors if the transfer is made within the relevant timeframe. Transfers can also be recovered by a bankrupt trustee under UFTA as well, if the country where the transfer takes place has been adopted and the transfer takes place within the relevant time period. Creditors can also pursue solutions under UFTA without the need for bankruptcy.
Since this type of second transfer does not always involve actual error, it is a common pitfall in which honest, but dishonest debtors fall when applying for bankruptcy without a lawyer. Particularly devastating and unusual is the situation in which an adult child takes the title to a parent's home as a self-help testament measure (to avoid confusion about who owns the house when parents die and to avoid losing home to perceived threats from the state). Then, when parents apply for bankruptcy without recognizing the problem, they can not release the house from the administration by the trustee. Unless they are able to pay the trustee an amount equal to greater than the equity in the home or the amount of their debt (either directly to Chapter 7 trustee or in payment to Chapter 13 guardian), the guardian will sell their house to pay the creditors. In many cases, parents will be able to free the house and safely carry it through bankruptcy if they defend the title or have regained the title before applying.
Even the good faith buyers of fake transfer property are only protected in part by US law Under the Bankruptcy Code, they retain the transfer to the level of value they provide for it, which means that they may lose a lot of benefits of their bargains, although they have no knowledge that the transfer to them is a fraud.
Often fraudulent transfers occur with respect to leveraged buyout (LBO), in which the failed management/ownership of the company will cause the company to borrow its assets and use the proceeds of the loan to buy the stock of the management/owner at a very high price. The corporate creditors will often have little or no unencumbered assets to take on their debts. LBO can be a deliberate or constructive fraudulent transfer, or both, depending on how clearly the corporation is experiencing financial distress when the transaction is completed.
Although not all LBOs are fake transfers, red flags are raised when, after LBO, the company then can not pay its creditors.
The responsibility of fraudulent transfer will often change the financial condition of the debtor at a certain point in the past. This analysis historically requires expert testimony of "duel" from the plaintiff and the defendant, which often leads to costly and inconsistent and unpredictable results. US courts and scholars have recently developed a market-based approach to try to streamline constructive fraud analysis, and judges increasingly focus on these market-based measures.
Switzerland
Under Swiss law, a creditor holding an unpaid debt certificate against a debtor, or a creditor in bankruptcy, may file a lawsuit against a third party who has benefited from unfair preferences or fraudulent transfers by the debtor prior to the seizure of an asset or bankruptcy.
South Korea
The fraudulent stream or otherwise known as the acts of revocatoire or acts of Pauline (??????) is the right to perpetuate the debtor's property to all creditors by canceling the act by the debtor that reduces the debtor's property with the knowledge that such actions harm the rights of the creditor. To exercise this right, the creditor must have the right to fight the debtor that is monetary and not personal and unique. For example, the right to claim to remove land from buildings or the right to land involves land and is unique and therefore not subject to the actions of Pauline (Korean Supreme Court's decision 10 February 1995, 94da2534).
See also
- Bayou Hedge Fund Group
- Fraud Deception 1571
- Bernard Madoff
- The British bankruptcy law
- Tunneling fraud
Note
External links
- Fraud transfers (Actio Pauliana) under Dutch and Belgian law (Articles in Dutch Wikipedia)
Source of the article : Wikipedia
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