Statute of Limitations After Discovery of A Fraudulent Transfer

Creditor actions for fraudulent transfers must be brought within four years of the transfer pursuant to Florida Statute 726.110. There is a “savings clause” that gives creditors no less than one year to file an action after they discover the transfer regardless of whether the transfer occurred more than four years ago. There is a difference between discovery of a debtor’s transfer and discovery of facts suggesting the same transfer was intended to defraud creditors.

A Florida appellate case decided in March, 2016, examined whether the statute of limitations saving clause on fraudulent transfers more than four years old runs from one year after the creditor discovers the transfer occurred or from one year after the creditor discovered facts suggesting the transfer was fraudulent. In this case, a debtor disclosed the recent transfer after a judgment was entered. The debtor initially testified that the transfer was made in consideration for the cancellation of a debt to his company. Then the debtor resisted the creditor’s discovery requests for over a year. Eventually, the debtor disclosed information that showed his recent transfer was not, in fact, made for consideration and appeared to be have been made solely to avoid this creditor’s judgment.

The court said the statute’s language clearly referred to the date of the transfer, and that an interpretation that the legislature actually intended the savings clause to begin from any other date, such as when facts about the transfer were discovered, was an impermissible expansion of statutory language. Even thought the creditor’s failure to discover important facts about the transfer was due to the debtor’s obstruction the statute provides no exception to the one year time limit starting with the date of transfer.

About the Author

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

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