If a person is delinquent on a debt, the creditor can sometimes force the liquidation of the debtor’s property to recover the funds they’re owed.
In these cases, the debtor might be required to sell assets like cars, homes, jewelry or stock to pay back their debt. However, what happens if the debtor gives away or sells their property first, leaving the creditor with nothing to recover?
Let’s review a hypothetical example. Tom is frustrated with paying child support payments to his ex-wife. He gives away his luxury car to his sister, and he arranges for all of his self-employment income to get deposited into his girlfriend’s bank account. Now there’s nothing for his ex-wife to recover. What happens now?
Unlawfully disposing of your assets or property to avoid having to pay back a debt is known as the crime of “fraudulent conveyance” in California. Fraudulent conveyance, also known as “concealing assets from creditors” is a misdemeanor and is punishable by up to a year in jail and $1,000 in fines.
What is fraudulent conveyance?
California Penal Code 154 PC defines fraudulent conveyance as:
- Selling, giving away or otherwise transferring property, and
- Doing so with the goal of:
- Preventing a creditor from getting to that property to pay off a debt,
- Making it more difficult for the creditor to get paid, or
- Delaying the creditor from getting paid.
The property involved in a fraudulent conveyance case can include:
- Money
- Cars, boats or recreational vehicles
- Real estate
- Jewelry, clothes or furniture
Punishment for fraudulent conveyance
Concealing assets from creditors is usually a misdemeanor in California, punishable by imprisonment in county jail for up to a year and fines of up to $1,000.
If the incident involved a stock trade valued at $250 or more, the severity of the crime rises to a felony. Felony fraudulent conveyance can carry prison sentences of 16 months, two years or three years.
Depending on the details of the case, fraudulent conveyance can also result in federal charges. Federal charges are very serious, so if you or someone you know has been accused or suspected of concealing assets from creditors, it’s important to speak with a skilled defense attorney as soon as possible.
Defenses against fraudulent conveyance charges
As we mentioned above, in order to convict someone of fraudulent conveyance, a prosecutor must show that they:
- Disposed of an asset they owned, and
- Intentionally did it to interfere with a creditor’s attempt to collect a debt.
This makes “lack of intent” one of the most common defenses in fraudulent conveyance cases. If the defense can show that the debtor transferred the property in good faith — perhaps as a gift to help a relative in need — then the defendant cannot be convicted of fraudulent conveyance.
Your attorney will work with you to carefully review the facts of your case and craft your defense.
Robert M. Helfend of the Helfend Law Group is a white collar crimes defense attorney, based in Los Angeles and defending federal cases nationwide. Recently recognized by the National Trial Lawyers Top 100 and SuperLawyers, he has a more-than 30 year track record of successfully defending fraud crimes. Call today for your free case evaluation – 800-834-6434.