In this session, I discuss fraudulent conveyances as covered on the CPA exam
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Fraudulent conveyance refers to a situation where a debtor illegally transfers property to avoid paying creditors. This type of transaction is either void or can be reversed in court. To determine if a transfer is fraudulent, courts look at several factors:

Transfer to an Insider: If the property is transferred to someone close to the debtor, like a family member, business partner, or co-worker, it might be fraudulent.
Retention of Possession or Control: If the debtor still controls or possesses the property after transferring it, this could indicate fraud.
Secret or Undisclosed Transfer: If the transfer is hidden or not made public, it could be suspicious.
Transfer of Nearly All Assets: If the debtor transfers almost all of their assets, it could be an attempt to avoid debts.
Unreasonable Value: If the debtor transfers property for much less than its worth, it might be fraudulent.
Insolvency Before or After Transfer: If the debtor was or becomes insolvent (unable to pay debts) around the time of the transfer, it might be fraudulent.
Example: Imagine a business owner, John, owes a large sum of money to several creditors. John fears he won't be able to pay them back. To avoid this, he transfers his main assets, like his company and properties, to his sister for a very low price. He continues to manage the business as if nothing has changed. When his creditors sue him for repayment, they discover these transfers. In court, these transfers are likely to be considered fraudulent conveyance because John transferred major assets to a close relative for less than their value, retained control of the business, and did all this while being in debt. The court can reverse these transactions, ensuring that the creditors have a chance to claim what is owed to them.



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