Collections: Seeking and Collecting A Judgment


FRAUDULENT CONVEYANCES: What happens if you are trying to collect from a debtor and you find that he/she recently transferred all or a large portion of their property to another person, most likely the spouse. I recently became involved in litigation regarding just that issue.

The husband owned a large house in Elbert County with his wife. As litigation loomed, he quit claimed his interest in the house to his wife, so that she is now the sole owner. Is this a fraudulent transfer?

Colorado Statute defines a fraudulent transfer two ways: either a transfer made with actual intent to hinder, delay, or defraud any creditor, or a reasonably equivalent value was not given in exchange for the transfer and the debtor was engaged in a business or transaction in which the remaining assets of the debtor were unreasonably small in relation to the business or transaction.

The second of these factors would eliminate a sale of an asset made to an unrelated third party for the value of the asset, such as a sale of real property. In my situation, there was no a sale to an unrelated third party.

How do we prove intent to defraud? The Court can look at multiple factors. Was the transfer made to an insider? The wife is considered an insider. Did the debtor retain control of the property after it was transferred? Since his wife is the owner, it can be assumed that the use of the property is still available to the debtor. Before the transfer was made, was the debtor sued or threatened with lawsuit? The debtor had been sued personally in multiple lawsuits totaling hundreds of thousands of dollars. Was the transfer was of substantially all of the debtor’s assets? It was a large portion of his assets. Did the debtor abscond? This debtor moved to Texas, which is very protective of debtors. Did the transfer occur shortly before or after a substantial debt was incurred? The transfer occurred shortly before substantial judgments were entered against the debtor. Did the debtor become insolvent as a result of the transfer? This fact is not known at this time. Was a reasonably equivalent value received for the transfer? The wife has alleged that she gave her husband consideration, but she has has not given proof of what that consideration was. Was this a fraudulent transfer? Soon the judge will decide. that question, if the parties do not settle it before trial.

By: Terry Ehrlich, Esq. /Collections-and-Creditor-Representation.shtml