Fraudulent Conveyance

AAA

DEFINITION of 'Fraudulent Conveyance'

The illegal transfer of property to another party in order to defer, hinder or defraud creditors, or to put such property out of the reach of a creditor. Fraudulent conveyance, for instance, would occur if an individual sold all of his possessions for an insignificant amount of money to a spouse, relative, business partner or friend.

Civil cases of fraudulent conveyance can be tried in a court of law. If the transfer of property is determined to be fraudulent, the court can require the person holding the assets (the person to whom the conveyance was made) to hand the assets, or an equivalent monetary value, over to the creditor.


Also called fraudulent transfer.

INVESTOPEDIA EXPLAINS 'Fraudulent Conveyance'

In order for somebody to be found guilty of fraudulent conveyance, it must be proven that the accused's intention for transferring the property was to put it out of reach of a known creditor. Two types of fraudulent transfer exist: actual fraud and constructive fraud. Actual fraud occurs when a debtor intentionally donates or rids himself of assets as part of an asset protection scheme.

Constructive fraud refers to fraud that occurred unintentionally or in a manner that was not intended to be fraudulent. The first case on fraudulent transfer law dates back to the late 1500s, when an English farmer tried to defraud his creditors by selling his flock of sheep while remaining in control of the flock. At shearing time, the man shore the sheep and marked them as his despite the fact that he had supposedly sold the sheep to another farmer.

RELATED TERMS
  1. Mini Madoff

    Financial con men that are accused of or have commited crimes ...
  2. Soft Paper Report

    A reference to a lack of confidence in a report's facts or general ...
  3. Conveyance

    The act of transferring an ownership interest in real property ...
  4. Creditor

    An entity (person or institution) that extends credit by giving ...
  5. Forensic Accounting

    Forensic Accounting utilizes accounting, auditing, and investigative ...
  6. Cease And Desist

    An order given by a government administrative agency or the courts ...
Related Articles
  1. What's On A Consumer Credit Report? ...
    Credit & Loans

    What's On A Consumer Credit Report? ...

  2. Debit Card Fraud: Is Your Money At Risk?
    Credit & Loans

    Debit Card Fraud: Is Your Money At Risk?

  3. The Importance Of Your Credit Rating
    Credit & Loans

    The Importance Of Your Credit Rating

  4. Protect Yourself From HELOC Fraud
    Credit & Loans

    Protect Yourself From HELOC Fraud

comments powered by Disqus
Hot Definitions
  1. Letter Of Credit

    A letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. ...
  2. Due Diligence - DD

    1. An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to ...
  3. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  4. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  5. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  6. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
Trading Center