Individuals and business organizations may legitimately seek to preserve wealth through various devices and methods known collectively as asset protection strategies. These often involve transferring money or other property into trusts and/or foreign bank accounts — which is perfectly legal so long as the transfer is not “fraudulent” in nature.
A fraudulent transfer occurs when a debtor moves assets in a way that frustrates the rights of one or more creditors. If the debtor transfers the asset with the intention to defeat or frustrate the rights of a creditor, the transfer may be “fraudulent-in-fact.” If the debtor’s transfers leaves the debtor insolvent (without sufficient assets to pay his/her/its creditors), the transfer may be “fraudulent-in-law.”
Illinois has adopted the Uniform Fraudulent Transfer Act, which prohibits fraudulent transfers and provides aggrieved creditors with remedies. The law does not specifically define the level of intent that constitutes fraud-in-fact, but sets out a number of criteria for making that determination, called “badges of fraud.” These badges include:
It’s not always clear whether an asset transfer is prudent planning or a scheme to evade a credible claim or threat of legal action. Fraudulent transfer litigation involves careful assessment and presentation of the facts and circumstances in order to determine the nature and intent of the transfers at issue.
Schwartz & Kanyock, LLC in Chicago is a full service commercial litigation law firm serving the metropolitan area and Northern Illinois. If you or your company have a debt collection or asset protection issue, please feel free to contact us online or call 312-436-1442 for a consultation.