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Fraudulent Transfers

 California Fraudulent Transfer Act

 

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In California, fraudulent transfers are defined in the California Penal Code. In addition, fraudulent transfers are defined in the U.S. Bankruptcy Code.

There are two basic types of fraudulent transfers. The most common is the intentional fraudulent transfer where property of a debtor is transferred to another person with the intent to defraud, hinder or delay his or her creditors. The other type is a constructive fraudulent transfer. This takes place when a debtor transfers his property to another without receiving "reasonably equivalent value" in exchange for the transfer, if the debtor is insolvent at the time of the transfer or becomes insolvent or is left with insufficient capital to continue in business as a result of the transfer. A constructive fraudulent transfer does not require the intent to defraud.

The California Penal Code defines fraudulent transfers as follows:

 

Section 154

(a) Every debtor who fraudulently removes his or her property or effects out of this state, or who fraudulently sells, conveys, assigns or conceals his or her property with intent to defraud, hinder or delay his or her creditors of their rights, claims, or demands, is punishable by imprisonment in the county jail not exceeding one year, or by fine not exceeding one thousand dollars ($1,000), or by both that fine and imprisonment.
   
(b) Where the property so removed, sold, conveyed, assigned or concealed consists of a stock in trade, or a part thereof, of a value exceeding two hundred fifty dollars ($250), the offense shall be a felony and punishable as such.



Section 155

(a) Every person against whom an action is pending, or against whom a judgment has been rendered for the recovery of any personal property, who fraudulently conceals, sells, or disposes of that property, with intent to hinder, delay, or defraud the person bringing the action or recovering the judgment, or with such intent removes that property beyond the limits of the county in which it may be at the time of the commencement of the action or the rendering of the judgment, is punishable by imprisonment in a county jail not exceeding one year, or by fine not exceeding one thousand dollars ($1,000), or by both that fine and imprisonment.
   
(b) Where the property so concealed, sold, disposed of, or removed consists of a stock in trade, or a part thereof, of a value exceeding two hundred fifty dollars ($250), the offenses shall be a felony and punishable as such.

 

Section 531

(a) Every person who is a party to any fraudulent conveyance of any lands, tenements, or hereditaments, goods or chattels, or any right or interest issuing out of the same, or to any bond, suit, judgment, or execution, contract or conveyance, had, made, or contrived with intent to deceive and defraud others, or to defeat, hinder, or delay creditors or others of their just debts, damages, or demands; or who, being a party as aforesaid, at any time wittingly and willingly puts in, uses, avows, maintains, justifies, or defends the same, or any of them, as true, and done, had, or made in good faith, or upon good consideration, or aliens, assigns, or sells any of the lands, tenements, hereditaments, goods, chattels, or other things before mentioned, to him or them conveyed as aforesaid, or any part thereof, is guilty of a misdemeanor.


 
 




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