Fraudulent Conveyance

Fraudulent Conveyance Lawyer in Houston

Texas Uniform Fraudulent Transfers Act (TUFTA)

In business and transactional dealings, there are laws that allow entities or individuals to protect assets against judgments and debt collection. However, there are also rules and restrictions.

While the state of Texas permits a range of transfers and means of mitigating liability or protecting assets, certain transfers may violate the Texas Uniform Fraudulent Transfers Act (TUFTA). This includes fraudulent conveyances made by a debtor who is unable to satisfy obligations to a creditor.

At Hendershot Cowart P.C., our award-winning attorneys counsel clients, companies, and colleagues across Texas in a range of matters involving business transactions, disputes, and litigation. This includes representing judgment creditors and debtors in claims of fraudulent conveyance / fraudulent transfer.

Call (713) 909-7323 today, or contact us online, to speak with our team.

On This Page:

What Is a Fraudulent Conveyance?

A fraudulent conveyance (also known as fraudulent transfer) is an attempt to hinder, delay, or avoid a debt or judgment by transferring an asset or interest in an asset to another entity or individual.

Under the Texas Uniform Fraudulent Transfers Act (TUFTA), a fraudulent conveyance, when proven, is voidable.

  1. TUFTA defines a 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 (TUFTA §24.001 (12)).
  2. As defined by TUFTA, an asset may be any property owned by a debtor, including payment of money, or the release, lease, and creation of a lien or other encumbrance. It does not include property with a lien, property held by a debtor and the debtor’s spouse as tenants-in-the-entirety, and property exempt from collection under Texas law. Because these involve partial ownership by another party (i.e. a creditor or a spouse), ownership rights cannot be transferred.

Under TUFTA, an asset transfer is fraudulent if the transfer or obligation was either:

  • Made with the intent to hinder, delay, or defraud a judgment creditor; or
  • Made without the debtor receiving a reasonably equivalent value in exchange for the transfer; and
  • The debtor was engaged or soon to be engaged in a business or transaction for which their remaining assets were unreasonably small; or
  • The debtor intended to or believed they would incur debts beyond their ability to pay.

Though TUFTA does not require intent in order for judgment creditors to prevail in their claim of fraudulent conveyance, Courts can consider a number of factors in determining actual intent.

Per TUFTA §24.005(b)(1)-(11), these include:

  • The transfer was made to an insider (i.e. a relative, partner, or corporation for which the debtor is a director, officer, or person in control);
  • The debtor remained in possession or control of transferred property after the transfer;
  • The debtor had been sued (or threatened with legal action) prior to the transfer or obligation;
  • Assets or the transfer or obligation was concealed, or the debtor absconded;
  • The debtor was insolvent or become insolvent shortly after the transfer or obligation;
  • The transfer included substantially all of the debtor’s assets;
  • The transfer took place shortly after or shortly before they incurred a substantial debt;
  • The debtor transferred assets of a business to a lienor who then transferred to an insider.

While no single factor determines a court’s decision, a determination that a transfer was fraudulent is legally supportable if several factors are present.

Removing a Fraudulent Conveyance

Judgment creditors may have grounds to pursue legal action to remove a fraudulent conveyance and return assets or property back to the debtor so that they may collect. Per TUFTA, creditors have the burden of proving alleged fraud, and must do so by a preponderance of the evidence.

While every case is different, creditors who prevail in their claims may be entitled to remedies such as:

  • Injunctive relief against the debtor, a transferee, or both;
  • Court-appointed receivership;
  • Monetary judgment (if a transfer cannot be practicably voided).

Hendershot Cowart P.C. – Proven Texas Trial Lawyers

If you are a creditor-plaintiff looking to explore options for legal action under TUFTA, or need to defend against claims of fraudulent conveyance, Hendershot Cowart P.C. is available to help. Based in Houston, our nationally recognized business law team represents clients across Texas and beyond.

With more than a century of collective legal experience, our attorneys can also provide comprehensive counsel to help clients explore proactive strategies and compliant asset-protection planning that mitigate risks for litigation and claims of fraudulent conveyance.

Call (713) 909-7323 or contact us online to speak with an attorney.

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