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.

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.



comments powered by Disqus
Hot Definitions
  1. Benchmark Bond

    A bond that provides a standard against which the performance of other bonds can be measured. Government bonds are almost always used as benchmark bonds. Also referred to as "benchmark issue" or "bellwether issue".
  2. Market Capitalization

    The total dollar market value of all of a company's outstanding shares. Market capitalization is calculated by multiplying a company's shares outstanding by the current market price of one share. The investment community uses this figure to determine a company's size, as opposed to sales or total asset figures.
  3. Oil Reserves

    An estimate of the amount of crude oil located in a particular economic region. Oil reserves must have the potential of being extracted under current technological constraints. For example, if oil pools are located at unattainable depths, they would not be considered part of the nation's reserves.
  4. Joint Venture - JV

    A business arrangement in which two or more parties agree to pool their resources for the purpose of accomplishing a specific task. This task can be a new project or any other business activity. In a joint venture (JV), each of the participants is responsible for profits, losses and costs associated with it.
  5. Aggregate Risk

    The exposure of a bank, financial institution, or any type of major investor to foreign exchange contracts - both spot and forward - from a single counterparty or client. Aggregate risk in forex may also be defined as the total exposure of an entity to changes or fluctuations in currency rates.
  6. Organic Growth

    The growth rate that a company can achieve by increasing output and enhancing sales. This excludes any profits or growth acquired from takeovers, acquisitions or mergers. Takeovers, acquisitions and mergers do not bring about profits generated within the company, and are therefore not considered organic.
Trading Center