Other States Permit Punitive Damages For Fraudulent Transfers

When first faced with the possibility of being sued many people’s first reaction is to transfer their assets to someone else or to a legal entity. A common question is whether such a transfer later found to be a fraudulent conveyance may increase the debtor’s liability for money damages. The answer depends upon where the debtor resides.

Florida courts have held that a creditor’s fraudulent transfer remedies do not include an award of additional damages against the debtor. Florida courts describe a fraudulent transfer action as being against the transferee of the debtor’s property to recover the property or the property’s value, but not as an action to compound damage awards against the debtor. There is a general principal of Florida law that a creditor may not recover twice for the same harm suffered as a result of the debtor’s initial tort or contract breach.

Debtor’s residing in other states face greater risk. In some states a creditor may seek additional damages on a fraudulent transfer claim, and that the additional award does not constitute a double recovery. These other states hold that shielding debtor’s from additional damages rewards the debtor’s fraudulent transfers. Some courts  permit awards of punitive damages against debtors making fraudulent conveyances whether or not the creditor demonstrates actual money damages by virtue of the conveyance.

About the Author

Jon Alper is an expert in asset protection planning for individuals and small businesses.

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