Fraudulent Conveyance

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.

BREAKING DOWN '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. Conveyance Tax

    A tax imposed on the transfer of real property at the state or ...
  2. Conveyance

    The act of transferring an ownership interest in real property ...
  3. Voluntary Conveyance

    Transfer of title from a delinquent homeowner to a lender to ...
  4. Clean Sheeting

    The fraudulent act of purchasing a life insurance policy without ...
  5. Asset Protection

    The concept of and strategies for guarding one's wealth. Asset ...
  6. Circular Trading

    A fraudulent trading scheme where sell orders are entered by ...
Related Articles
  1. Trading

    Detecting Financial Statement Fraud

    Find out how to tell if a company is manipulating its financial data, so you don't invest in the next Enron.
  2. Personal Finance

    Mortgage Fraud: Understanding and Avoiding It

    There are many different ways to be victimized through home ownership - learn how to identify and avoid these crimes.
  3. Personal Finance

    Equity Stripping Leaves Creditors Empty-Handed

    Add additional debt to your real estate assets to keep the creditors at bay.
  4. Investing

    What Is A Ponzi Scheme?

    Protect yourself from scams by learning the structure behind this fraudulent investing scheme.
  5. Investing

    What Does a Creditor Do?

    A creditor is a person or entity that loans money or provides goods or services to another entity with the expectation of being paid back in the future.
  6. Retirement

    Holding Titles On Real Property

    Find out how best to claim and convey ownership on your assets.
  7. Personal Finance

    Transferring Credit Card Balances To A New Card

    Before you take advantage of that new credit card's 0% interest balance transfer offer, read our step-by-step guide.
  8. Managing Wealth

    Protect Your Personal Assets

    A family limited partnership (FLP) can go a long way toward securing your family's property.
  9. Personal Finance

    What You Need To Know About Insurance Fraud

    Insurance fraud is as old as commerce. Discover the types of life insurance fraud and how they affect you.
  10. Investing

    How Property Rights Affect Economies

    Property rights are laws governments create that enable investors to control, benefit from, and transfer property.
RELATED FAQS
  1. In a corporate liquidation, why are unpaid taxes and wages paid before general creditors ...

    The Bankruptcy Code, section 507, states that when a corporation is liquidated, creditors are paid in a particular order: ... Read Answer >>
  2. What were the primary financial crimes involved in the ZZZZ Best case?

    Learn about the primary financial crimes involved in the ZZZZ Best case, one of the most notorious episodes of accounting ... Read Answer >>
  3. According to the U.S., prohibited conduct of an investment advisor is defined as:

    I. Fraudulent investment advice.II. Distribution of unregulated advertising materials.III. Misleading filings.IV. Making ... Read Answer >>
  4. Are there any regulations on transfer pricing?

    Learn about transfer pricing, its role in intra-business calculations, and how the U.S. government regulates transfer pricing ... Read Answer >>
  5. What are the full rights of creditors in cases of bankruptcy?

    Learn more about corporate bankruptcy and the rights of creditors. Find out how creditors are repaid in the event of bankruptcy ... Read Answer >>
  6. Who can attend the meeting of creditors (341 hearing)?

    Learn about who may attend and what typically takes place at a 341 creditors hearing. Find out about the role of the trustee ... Read Answer >>
Hot Definitions
  1. European Union - EU

    A group of European countries that participates in the world economy as one economic unit and operates under one official ...
  2. Sell-Off

    The rapid selling of securities, such as stocks, bonds and commodities. The increase in supply leads to a decline in the ...
  3. Brazil, Russia, India And China - BRIC

    An acronym for the economies of Brazil, Russia, India and China combined. It has been speculated that by 2050 these four ...
  4. Brexit

    The Brexit, an abbreviation of "British exit" that mirrors the term Grexit, refers to the possibility of Britain's withdrawal ...
  5. Underweight

    1. A situation where a portfolio does not hold a sufficient amount of a particular security when compared to the security's ...
  6. Russell 3000 Index

    A market capitalization weighted equity index maintained by the Russell Investment Group that seeks to be a benchmark of ...
Trading Center