A fraudulent transfer occurs when a debtor sells or gives away assets for less than fair value in an attempt to defraud a creditor. Given certain circumstances, courts can invalidate and revoke these transfers to allow a creditor to collect.
In most states, a fraudulent transfer lawsuit must be filed within four years from the date of the transfer or one year after the transfer could have been reasonably discovered by the creditor.
In these instances, a fraudulently transferred asset is never completely safe from recovery because a creditor can argue they only recently discovered a transfer which may have happened years earlier. The creditor would then have one additional year to set aside the transfer.
Other states impose a strict five-year statute of limitations and disallow later claims regardless of when the creditor discovered the transfer.
For a fraudulent transfer claim to be successful, the creditor must convince the court that the transfer was a last-ditch effort by the debtor to defraud them.
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