Fraudulent conveyance

[1] It is generally treated as a civil cause of action that arises in debtor/creditor relations, typically brought by creditors or by bankruptcy trustees against insolvent debtors, but in some jurisdictions there is potential for criminal prosecution.

Constructive fraud does not relate to fraudulent intent, but rather to the underlying economics of the transaction, if it took place for less than reasonably equivalent value at a time when the debtor was in a distressed financial condition.

In a successful lawsuit, the plaintiff is entitled to recover the property transferred or its value from the transferee who has received a gift of the debtor's assets.

Although fraudulent transfer law originally evolved in the context of a relatively simple agrarian economy, it is now widely used to challenge complex modern financial transactions such as leveraged buyouts.

This analysis has historically required "dueling" expert testimony from both plaintiffs and defendants, which often led to an expensive process and inconsistent and unpredictable results.

Courts and scholars have recently developed market-based approaches to try to make this analysis simpler, more consistent across cases, and more predictable.

[22] Because this second type of transfer does not necessarily involve any actual wrongdoing, it is a common trap into which honest, but unwary debtors fall when filing a bankruptcy petition without an attorney.

Later, when the parents file a bankruptcy petition without recognizing the problem, they are unable to exempt the home from administration by the trustee.

LBOs can be either intentional or constructive fraudulent transfers, or both, depending on how obviously the corporation is financially impaired when the transaction is completed.

This analysis has historically required "dueling" expert testimony from both plaintiffs and defendants, which often led to an expensive process and inconsistent and unpredictable results.

U.S. courts and scholars have recently developed market-based approaches to try to streamline the analysis of constructive fraud, and judges are increasingly focusing on these market based measures.