Fraudulent Transfers and Debtor Misconduct
Unwinding Improper Transfers and Holding Debtors Accountable Under New York Law
When judgment debtors believe enforcement is imminent, they often attempt to move assets out of reach. These transfers may be made to family members, business partners, shell companies, or newly formed entities. Sometimes they occur quietly; other times they are obvious and deliberate. In either case, New York law provides powerful mechanisms for unwinding these transactions and recovering the assets that should have been available to satisfy the judgment.
Fraudulent transfer litigation requires careful investigation, precise pleading, and a firm understanding of how debtors attempt to shield assets. I take on a limited number of these matters to ensure each receives the detailed analysis and strategic planning that this type of litigation demands.
What Is a Fraudulent Transfer?
Under New York’s Debtor and Creditor Law (DCL), a transfer is considered fraudulent if it was made:
- with actual intent to hinder, delay, or defraud creditors, or
- without receiving reasonably equivalent value, at a time when the debtor was insolvent or became insolvent as a result of the transfer.
Why Fraudulent Transfers Matter in Judgment Enforcement
A judgment becomes meaningless if a debtor can simply shift assets to another person or entity. Fraudulent transfer litigation ensures that judgment creditors are not left without recourse. These claims can:
- void the transfer entirely,
- compel the transferee to return the asset or its value,
- impose liability on the transferee,
- expose related companies or individuals to judgment enforcement,
- support broader veil-piercing or alter-ego theories.
Recognizing Common Signs of Debtor Misconduct
Indicators of fraudulent intent often appear soon after a lawsuit is filed or immediately following the entry of a judgment. Common patterns include:
- transferring property to relatives for little or no consideration,
- forming new companies to continue the same business under a different name,
- draining bank accounts,
- commingling personal and business funds,
- sudden changes in compensation or distributions,
- selling assets for below-market value,
- rerouting income streams to insiders,
- closing accounts and opening new ones at different institutions.
Building a Fraudulent Transfer Case
These cases require more than suspicion. They demand a structured understanding of the debtor’s financial behavior and the ability to trace assets through documents, disclosures, and discovery. A typical analysis includes:
- reviewing bank statements, transfers, and account activity,
- examining business records, tax filings, or contracts,
- identifying relationships between the debtor and transferees,
- comparing the timing of transfers with litigation events,
- evaluating whether the debtor received fair value,
- determining whether the debtor was insolvent or became insolvent after the transfer.
How Fraudulent Transfer Litigation Interacts With Other Enforcement Tools
Fraudulent transfer claims are frequently paired with:
- restraining notices to freeze remaining assets,
- subpoenas to identify recipients of transfers,
- turnover proceedings under CPLR § 5225(b),
- veil-piercing or alter-ego theories,
- successor-liability claims involving newly formed entities.
Debtor Misconduct Beyond Transfers
Not all misconduct involves the movement of assets. Debtors may also:
- refuse to respond to subpoenas,
- conceal financial records,
- lie about the existence of accounts or businesses,
- engage in cash-heavy operations to avoid traceability,
- thwart orders of the court.
Why These Cases Require a Focused, Evidence-Driven Approach
Fraudulent transfer litigation is rarely simple. It often involves multiple actors, overlapping transactions, and the need to reconstruct financial histories. Because I maintain a limited caseload, each case is examined with care. The objective is not only to unwind improper transfers but to position the creditor for full enforcement — whether through turnover orders, settlement, or direct recovery from transferees.