CA law on gifting property away to avoid creditor claims
Dear Clients and Friends,
The California Uniform Fraudulent Transfer Act (UFTA) prohibits debtors from transferring or placing property beyond the reach of their creditors when that property should be available creditors to claim.
The UFTA is not the only means by which a creditor may attack a fraudulent conveyance. They can also pursue common law actions against debtors who have transferred assets in an attempt to keep them from creditors.
Any debtor thinking about transferring funds to protect them from creditors must realize that merely transferring them does not do much more than create more trouble and difficulty. It enlarges the litigation to include family and friends who were unfortunate enough to receive those transfers. Any aggressive creditors (and most creditors are) who has competent legal counsel will quickly file the requisite action and the friends or family member may find themselves facing substantial legal fees and prolonged unpleasant litigation.
Practically speaking, if the transfer occurred after the debt was obviously leading to judgment and if the transfer was not for valid consideration, one is merely asking for litigation by such transfers and a payment program would probably make more sense.
For judgment creditors, one should not lose hope when a judgment debtor reveals that he or she has no assets. Quite often an Order of Examination or a report by an investigator will demonstrate a pattern of such transfers which may justify prompt and effective demands for the return of the assets from the third party transferees.
Such transfers are so tempting and so typical that the effort to retrieve the assets is well known in the Courts and the simple rule that is applied (the closer to the judgment and the less the consideration paid by the transferee, the easier a case to prove) can often result in successful collections from a judgment debtor once thought without assets.
We continue to invite you to call us for a free phone evaluation of any of your legal debtor/creditor problems - including bankruptcy - to see if we can be of help.