fraudulent transfer

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Fraudulent transfer or conveyance, in a bankruptcy case, means a transfer of property to another for less than the property's value for the purpose of hiding the property from the bankruptcy trustee; for instance, when a debtor signs a car over to a relative to keep it out of the bankruptcy estate. Fraudulently transferred property can be recovered and sold by the trustee for the benefit of the creditors.

In United States v. Frykholm, 362 F.3d 413, it was held that “a conveyance is fraudulent when the debtor receives less than a reasonably equivalent value in exchange for such transfer or obligation and the debtor was insolvent on the date that such transfer was made or such obligation was incurred, or became insolvent as a result of such transfer or obligation.”

[Last updated in May of 2022 by the Wex Definitions Team]