A client asked me whether it was harder for a future creditor to challenge a fraudulent transfer or a fraudulent conversion. A fraudulent transfer is a debtor’s conveyance of an asset to another person with the intent to protect the asset from a judgment creditor. An example of a transfer is deeding real estate to an LLC or another family member. A fraudulent conversion is the debtor’s changing a non-exempt asset into an exempt asset with same intent. An example of a conversion is using non-exempt money to purchase an exempt annuity contract. In a conversion, the debtor is the only person involved, but the nature of the asset changes. In a transfer, the asset stays the same but a different person has title to the asset.
In more than one way, Florida statutes make it easier for a judgment creditor to challenge a fraudulent transfer compared to challenging a conversion. For example, a creditor can bring a fraudulent transfer allegation pertaining to transferred personal property during the 20 year life of a civil judgment under Florida’s proceeding supplementary statutes. A creditor may not challenge fraudulent conversions except under fraudulent conversion statutes subject to a four-year statute of limitations. For this and other reasons a judgment is better able to defend conversions than transfers.
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