Fraudulent Conveyance Definition and Legal Meaning

On this page, you'll find the legal definition and meaning of Fraudulent Conveyance, written in plain English, along with examples of how it is used.

What is Fraudulent Conveyance?

(n) Fraudulent conveyance is the transfer of title to a real property with an intention to avoid any possible claim which is due or may arise on such property. Eg. Selling the property when a creditor filed a suit to recover his dues from such property

History and Meaning of Fraudulent Conveyance

Fraudulent conveyance is a legal concept tracing back to the Statute of 13 Elizabeth in England in 1571. The statute aimed to prevent individuals from transferring their assets out of the reach of their creditors to avoid paying their debts.

In modern times, fraudulent conveyance applies to any transfer of property or assets made with the intent to defraud, delay or hinder creditors. The transfer can be made voluntarily or involuntarily. However, for a conveyance to be deemed fraudulent, the transferor must have intended to hinder, delay or defraud creditors at the time of the transfer.

Examples of Fraudulent Conveyance

  1. X sells his house to his sister for a token amount to avoid paying back the money he owed to his creditors. This is a clear case of fraudulent conveyance.
  2. A company owner transfers all the assets of the business to his wife to avoid paying creditors. This can be considered fraudulent conveyance if the transfer was made with the intention of avoiding creditors.
  3. A man sells his expensive car to his friend for much less than its market value to prevent it from being seized by creditors. This transfer can be judged as fraudulent if it was made with the intention of avoiding creditors.

Legal Terms Similar to Fraudulent Conveyance

  1. Fraudulent transfer: A similar legal concept that applies to the transfer of any asset or property, not just real property.
  2. Preferential transfer: A transfer of property made by an insolvent debtor to a creditor, which provides an unfair advantage to that creditor over others.
  3. Undue Influence: Refers to the use of pressure, manipulation or coercion to take advantage of someone in a transaction whereby the person influenced did not truly give their explicit and implicit consent.