Fraudulent Transfers Remedy Under Proceedings Supplementary

Jon Alper Fraudulent Transfers, Uncategorized

Collection of money judgments is conducted through proceedings supplementary under Florida Statute 56.29. The proceedings supplementary statutes include procedures to remedy the debtor’s fraudulent transfers of personal property.  (56.29 (3). Fraudulent transfers are also addressed under a separate statute, Section 726.105. Section 726.110 imposes a four year statute of limitations on fraudulent transfer actions brought under Section 726.105 .

I’ve previously mentioned in a blog post that the statute of limitations for fraudulent transfer remedies brought to recover personal property under proceedings supplementary 56.29(3) is much longer than four years; the proceedings supplementary statute permits fraudulent transfer remedies throughout the 20 year life of the judgment. This rule seems to substantially increase the creditor’s reach to recover alleged fraudulent transfers of personal property made decades after a judgement is entered or a transfer is made.

A recent bankruptcy case (2019 W.L. 4735493) closely examines fraudulent transfer remedies under Section 56.29(3) of proceedings supplementary law and compares those rules to the more general fraudulent transfer remedies under Chapter 726. The court finds that the fraudulent transfer remedy under proceedings supplementary are more limited and of less value to creditors than they may first appear. The court points out that proceedings supplementary fraudulent transfer remedies permit only the unraveling or reversal of transfers and they do not include a remedy for money damages against either the transferor or the transferee. The creditor cannot get a judgment against the transferee for the value of property transferred; a money judgment is the most important remedy of the general fraudulent transfer remedy under Chapter 727. Under proceedings supplementary, a creditor must identify a specific item of personal property still in the hands of the transferee and ask the court to order the property’s return to the debtor—that is the full extent of the remedy.

The proceedings supplementary statute remedy for fraudulent transfers under 56.29(3) in effect is a relatively weak remedy. For example, if a debtor made a fraudulent transfer of money and the transferee commingled the money with his other funds the creditor would have difficulty identifying property transferred, received, and remaining in the hands of the transferee. Or, if the transferee sold or otherwise transferred an item of personal property the creditor cannot sue the transferee for the value of property or the money the transferee received from the sale; these remedies would be available under the general fraudulent transfer remedies of Chapter 726.

The most consequential fraudulent transfer remedies are subject to a four year statute of limitations under the general fraudulent transfer law within Chapter 726, Florida Statutes.

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