Judgment Against Intermediary of Fraudulent Transfer

Florida law limits creditor remedies for fraudulent transfers. A court may reverse a transfer but it may not impose additional damages against a debtor simply because the debtor transferred property to avoid the judgment. The law does not prohibit damages against a transferee who is not the debtor. The recipient of a fraudulent conveyance is exposed to damages.

In a 2018 Florida case a judgment debtor arranged for the fraudulent conveyance of a residential property from his ex-spouse to an LLC owned and controlled by the debtor. The LLC then conveyed the property to the debtor who proceeded to occupy the property as his homestead.

The court found that the creditor could not impose a lien or other remedy affecting the property once the property became the debtor’s homestead. The court stated that transfers in to a homestead may not be reversed even if the debtor established the homestead with specific intent to protect the property from forced sale. The court found it did have authority to enter a judgment against the LLC because the LLC was the initial transferee of a fraudulent conveyance from the debtor’s ex-spouse.

People contemplating transfers of property to avoid collection should member that the person who receives the property, directly or indirectly, may be exposed to a damage judgment. There is more risk for receiving fraudulent transfers than there is for initiating fraudulent transfers.

Last updated on May 22, 2020

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