Creditor Attorney Fees in a Florida Fraudulent Transfer Action

Florida’s fraudulent transfer statute does not authorize an award of attorney fees. Chapter 726 of the Florida Statutes lists the remedies available to a creditor who proves a fraudulent transfer, but fee-shifting is not among them. A creditor who successfully unwinds a debtor’s transfer cannot recover the legal costs incurred to prosecute the fraudulent transfer claim itself.

This rule benefits debtors in two ways. It reduces the financial risk of contesting a creditor’s fraudulent transfer allegations, and it limits the amount that can be added to the underlying judgment through collection activity.

Why Chapter 726 Does Not Allow Fee Recovery

Florida follows the “American Rule” on attorney fees. Each side bears its own legal costs unless a statute, contract, or court rule expressly authorizes fee-shifting. Chapter 726 contains no such provision.

Creditors have tried to work around this limitation by relying on the statute’s catch-all remedy. Section 726.108(1)(c)(3) authorizes courts to grant “any other relief the circumstances may require” in a fraudulent transfer action. Some creditors have argued that this open-ended language permits an award of attorney fees and even punitive damages.

The Eleventh Circuit Court of Appeals rejected this argument in SE Property Holdings, LLC v. Welch (2023). The court held that the catch-all provision was intended to facilitate the statute’s other equitable remedies, not to create independent grounds for monetary awards. Relying on the Florida Supreme Court’s decision in Freeman v. First Union National Bank (2004), the Eleventh Circuit reasoned that FUFTA was designed as a creditor remedy statute, not a damages statute. Adding attorney fees or punitive damages would expand FUFTA beyond its legislative purpose.

A federal district court in Florida reached the same conclusion in Wesolek v. Wesolek (2020), holding that the catch-all provision does not provide a sufficient basis for a fee award. The court found no language in FUFTA suggesting the legislature intended to create a fee-shifting mechanism.

No Punitive Damages Either

The same reasoning that bars attorney fees also bars punitive damages. The Eleventh Circuit in SE Property Holdings noted a split among states on whether their versions of the Uniform Fraudulent Transfer Act permit punitive damages, but concluded that Florida’s Supreme Court would reject them. Punitive damages are not mentioned in FUFTA, are not among the equitable remedies the statute enumerates, and are inconsistent with the narrow remedial framework the Florida Supreme Court described in Freeman.

This matters for debtors facing aggressive creditors. Even a debtor whose transfer is found to be fraudulent with clear intent to hinder creditors faces only reversal of the transfer and related equitable relief. The creditor does not gain additional monetary penalties beyond the original judgment.

Attorney Fees in Proceedings Supplementary

A separate statute does allow fee recovery in certain collection contexts. Section 57.115 of the Florida Statutes permits a court to award reasonable attorney fees and costs incurred by a judgment creditor “in connection with execution on a judgment.” The court considers whether the judgment debtor attempted to avoid or evade payment.

This provision applies to the general judgment collection process, not specifically to fraudulent transfer claims. A creditor pursuing proceedings supplementary to execute on a judgment may seek fees under this statute if the debtor has been evasive or obstructive. The fee award is discretionary, not automatic.

Courts have limited the reach of this provision. One Florida appellate court held that fees under this statute do not apply to garnishment proceedings, which have their own procedural framework. The statute is more likely to support fee awards where the creditor undertook extensive collection efforts beyond routine garnishment or levy.

The distinction matters for asset protection planning. A debtor who cooperates with post-judgment discovery and does not actively obstruct collection faces less exposure to fee awards under this statute. A debtor who hides assets, lies on financial disclosure forms, or repeatedly evades process creates the conditions that justify a discretionary fee award.

Contractual Fee-Shifting and Its Limits

Some underlying judgments include attorney fee provisions from the original contract or statute that gave rise to the debt. A contract clause awarding fees to the prevailing party in any action to enforce the agreement might be broad enough to encompass post-judgment collection activity, including fraudulent transfer litigation.

Whether a contractual fee provision extends to a fraudulent transfer action depends on the language of the clause. A provision covering fees incurred “to enforce this agreement” or “to collect amounts due” may reach collection-related litigation. A narrower provision tied to breach of contract claims likely does not extend to a separate fraudulent transfer proceeding.

Florida’s reciprocal fee statute also applies. If a contract entitles one party to recover fees, the other party is entitled to the same recovery if that party prevails. A debtor who successfully defends against a fraudulent transfer claim brought by a creditor holding a contract with a fee provision may be able to recover defensive fees.

Fees Under the Bankruptcy Code

Bankruptcy introduces additional fee-shifting possibilities. Section 548(c) of the Bankruptcy Code provides a defense for transferees who received property in good faith and for value, but it does not independently authorize fee awards.

However, the bankruptcy court’s general equitable powers and the Bankruptcy Code’s provisions for sanctions against bad-faith conduct can produce fee-shifting in extreme cases. A debtor who files for bankruptcy and then obstructs the trustee’s investigation into pre-petition transfers may face sanctions that include the trustee’s attorney fees.

The interaction between bankruptcy fraudulent transfer lookback periods and fee exposure is worth noting. A transfer challenged within the two-year federal lookback period under the Bankruptcy Code subjects the debtor to federal court procedures where fee-shifting rules differ from those in Florida state court.

What This Means for Debtors

The absence of fee-shifting in Chapter 726 is a meaningful protection for debtors. A creditor pursuing a fraudulent transfer claim bears its own legal costs regardless of the outcome. This economic reality affects settlement dynamics.

A creditor holding a $200,000 judgment who spends $50,000 in attorney fees to prosecute a fraudulent transfer claim can recover, at most, the original judgment amount through reversal of the transfer. The $50,000 in legal fees comes out of the creditor’s recovery, not the debtor’s pocket. When the transferred assets are modest or the legal issues are contested, the economics of prosecution may favor settlement over litigation.

Debtors should be aware, however, that fee exposure can arise through channels other than Chapter 726. Collection activity under proceedings supplementary, contractual fee provisions in the underlying debt instrument, and bankruptcy proceedings all create potential fee liability. Effective asset protection planning accounts for these separate fee risks when evaluating the consequences of a transfer that may later be challenged.