Patent1In an earlier post, Fraudulent Transfers and Creditors’ Rights to Collect, we discussed collection against an insolvent debtor. But what about a savvy future debtor who takes action to make sure a future debt cannot be collected?

If an Arizona creditor is already owed money, it is not necessary to show fraudulent intent to prove fraudulent transfer. However, a creditor is also entitled to a finding of fraudulent transfer for a transfer that occurred before the debt, if the transfer was made “with actual intent to hinder, delay or defraud any creditor of the debtor.”

There are several factors that may be considered to determine actual intent, including:

1. The transfer or obligation was to an insider.
2. The debtor retained possession or control of the property transferred after the transfer.
3. The transfer or obligation was disclosed or concealed.
4. Before the transfer was made or obligation was incurred, the debtor had been sued or threatened with suit.
5. The transfer was of substantially all of the debtor’s assets.
6. The debtor absconded.
7. The debtor removed or concealed assets.
8. The value of the consideration received by the debtor was reasonably equivalent to the value of the asset transferred or the amount of the obligation incurred.
9. The debtor was insolvent or became insolvent shortly after the transfer was made or the obligation was incurred.
10. The transfer occurred shortly before or shortly after a substantial debt was incurred.
11. The debtor transferred the essential assets of the business to a lienor who transferred the assets to an insider of the debtor.

These factors, known as “badges of fraud,” can be used to prove your debtor took steps before the debt to make sure you wouldn’t collect. If you encounter any of these red flags when attempting to collect, an experienced attorney can help you recover your debt despite a debtor’s careful planning.

The attorneys at Windtberg & Zdancewicz, PLC provide clients with experienced legal representation in all litigation and bankruptcy matters. We are experienced in creditor’s rights including garnishments, charging orders, attachment, property execution, trustee’s sales, foreclosures, judgments, judgment collection, domestication of foreign judgments, and creditor’s issues in bankruptcy cases. If you need assistance with your collection matters, please contact us at (480) 584-5660.