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What is fraudulent conveyance?

On Behalf of | Oct 27, 2021 | Fraud

When businesses file for bankruptcy, there are certain requirements they’re supposed to meet. One of these is that they need accurately report their assets to the court. This is the only way that a decision about the petition can be made. And, the information is used to determine how the bankruptcy should be handled. 

Sometimes, in an effort to protect assets they’re worried the trustee may order sold, a company may try to hide those assets — or transfer them into another’s name. This is known as a fraudulent conveyance. When a bankruptcy is filed, the court will look back at transactions related to assets. The look-back period is two years, so anything transferred or sold during that period might be considered during the bankruptcy case. 

What are the types of fraudulent conveyance?

There are two primary types of fraudulent conveyance. The circumstances of the conveyance determine which is present. These include:

  • Constructive fraudulent conveyance: A person may not intend to do anything wrong with this type of conveyance. It happens when there’s an unfair transfer of property during or immediately preceding a bankruptcy proceeding.
  • Actual fraudulent conveyance: This is an intentional act that’s meant to protect the assets. It can occur by transferring assets to someone else. In some cases, this type of fraudulent conveyance is meant to avoid taxation.

Anyone who’s being accused of fraudulent conveyance should ensure they’re learning what options they have. These cases are usually considered civil matters. If your company is accused of fraudulent conveyance, it can be frustrating and problematic — and it can slow down your efforts at reorganization. Experienced guidance can help you get past this block in the road.