Federal Court Order Distinguishing Fraudulent Transfers From Common Law Fraud

People often confuse a fraudulent transfer in asset protection or bankruptcy law with the crime of fraud or common law civil fraud. Common law fraud or criminal fraud are types of “evil fraud.” This type of fraud involves intentional deceit or cheating of innocent victims. The fraud involves intent to harm and the victim suffers damages. The judicial remedy is incarceration in the case of criminal fraud and damages in the case of civil common law fraud.

Fraudulent transfers or fraudulent conversions to evade or avoid creditors are reversible because there are Florida statutes which give courts the authority to undo such transfers or conversions and put the property back in the hands of the debtor where it is subject to creditor levy. Fraudulent transfer actions are creditor remedies; they are part of the creditor’s array of tools used to collect judgments. A court may not award a creditor any additional damages for a debtor’s fraudulent transfers or conversions. Certainly, no one ever went to jail for making a fraudulent transfer to protect assets from creditors.

Many attorneys confuse civil/criminal fraud, the “evil fraud”, with reversible fraudulent transfers. Some judges confuse the two concepts. An attorney I know sent me an order issued by a federal district court judge which clearly distinguishes fraudulent transfers from common law fraud. This order is not precedent. Nevertheless, readers may find the analysis and cases cited within to be helpful in arguing this issue in their own cases.