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What is a Fraudulent Conveyance?

As explained by the Cornell Legal Information Institute, a fraudulent conveyance is a transfer of real property — money or assets — for the primary purpose of putting it outside of the reach of creditors. If a transaction is deemed to be a ‘fraudulent conveyance’ a creditor may have the right to void it. In this article, our Columbia, SC debt collection attorneys highlight the most important things creditors should know regarding South Carolina’s laws on fraudulent conveyances.

South Carolina Law: Fraudulent Conveyances

South Carolina is one of many states that has signed onto the Uniform Fraudulent Transfer Act (UFTA). The UFTA makes it a civil violation for debtors to transfer assets to a third party simply to avoid paying back creditors. A fraudulent conveyance is generally not a criminal issue. When such a transfer occurs, the UFTA provides a remedy to creditors, allowing them to get access to fraudulently transferred property that would have otherwise not been available to satisfy a debt. To prove a fraudulent conveyance occurred, South Carolina creditors are generally required to meet the following three elements:

  1. The debtor in question actually transferred assets;
  2. The debtor received less than fair market value in the transaction; and
  3. The debtor is insolvent or was made insolvent as a result of the transfer.

If a debtor receives fair market value for the transfer of property, then, by definition, a fraudulent conveyance has not occurred. The debtor’s ability to satisfy their obligations to creditors would remain unchanged. In addition, a debtor that is fully solvent cannot make a fraudulent conveyance, as all creditors would still be able to hold them responsible irrespective of the transaction.

When Does Intent Matter? Voluntary Conveyance vs. Valuable Consideration

In South Carolina, fraudulent conveyance claims come in two different forms: those involving a ‘voluntary conveyance’ and those involving ‘valuable consideration’. With a voluntary conveyance — meaning a transfer in which no compensation was offered or grossly inadequate compensation was offered — creditors do not need to prove that the debtor had an actual intent to defraud. The intent is deemed irrelevant if the debtor received nothing, or very little in the return for transferring property (Royal Z Lanes, Inc. v. Collins Holding Corp). In contrast, when ‘valuable consideration’ was offered to the debtor — even though that consideration may have been below the true market value of the property — the burden of proof flips. In this circumstance, a creditor must be able to prove that the debtor actually made the transfer with the intent of avoiding satisfying their debts to the creditor.

Get Help From a Columbia, SC Creditors’ Rights Lawyer Today

At Crawford & von Keller, LLC, our South Carolina collection attorneys have the skills and experience needed to handle the full range of fraudulent conveyance claims. To set up a fully confidential, no obligation consultation, please do not hesitate to contact our legal team today. From our office in Columbia, we represent clients throughout South Carolina, including in Richland County and Lexington County.

 

Fraudulent Conveyance Law

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