Sometimes a fradaulent conveyance is referred to as “concealing assets from creditors” or “hiding your assets.”
Under the Penal Code Section 1551, the offense essentially prohibits a party in a pending matter or a losing party against whom a judgment has been entered for the recovery of their personal property from selling, giving away, or transferring in some way his/her personal property to someone else to avoid the winning party in the case from recovering the judgment amount.
How Does the Prosecutor Prove The Offense Of Fraudulent Conveyance By a Judgment Debtor?
To prove that you are guilty of this offense, the prosecutor has to prove the following facts or elements2:
- You have to be either a defendant in a pending matter or a losing party in the matter
- You took any of the following actions:
- Removed your property out of state
- Sold it to someone else
- Gave it to someone else as a gift
- You did so with intent4 to defraud, hinder or delay the winning party in the matter from recovering the judgment amount.
Example: Chris was sued by the Bank to recover the $80,000 debt Chris owed as a result of taking out a business loan from the Bank. After the lawsuit began but prior to the judgment being entered for the Bank, Chris sold his Maserati to his girlfriend Stephanie to prevent the Bank from using it to satisfy the Bank’s judgment in case the Bank wins.
Chris may have just commited the crime of fraudulent conveyance and be charged with the offense because he sold his personal property to prevent the Bank from recovering the judgment amount.
Who Can Be Charged With The Offense of Fraudulent Conveyance By A Judgment Debtor?
You can be charged with the offense if you are the losing party in a matter and you were ordered to pay the judgment amount to the prevailing party. In addition, you can also be charged with the offense while the matter is pending and prior to the court ordering you to pay a judgment to the prevailing party.
How Can You Fight A Charge Of Fraudulent Conveyance By A Judgment Debtor?
Lack of intent:
Because the prosecutor has to prove the element of intent to charge a defendant with the offense, absence of intent is a viable legal defense to this charge.
The court looks at a multitude of factors to determine whether the defendant had the requisite actual intent in this context, including the following factors:
- Whether the transfer or obligation was to an insider;
- Whether the debtor retained possession or control of the property transferred after the transfer;
- Whether the transfer or obligation was disclosed or concealed;
- Whether before the transfer was made or obligation was incurred, the debtor had been sued or threatened with suit;
- Whether the transfer was of substantially all the debtor’s assets;
- Whether the debtor absconded;
- Whether the debtor removed or concealed assets;
- Whether the value of the consideration received by the debtor was reasonably equivalent to the value of the asset transferred or the amount of the obligation incurred;
- Whether the debtor was insolvent or became insolvent shortly after the transfer was made or the obligation was incurred;
- Whether the transfer occurred shortly before or shortly after a substantial debt was incurred;
- Whether the debtor transferred the essential assets of the business to a lienholder who transferred the assets to an insider of the debtor.5
Example: Jake sold his expensive car to Joe for $200 just to prevent Bank A from using the car to satisfy the judgment awarded to Bank A.
However, Jake continued to drive and to generally possess the car. The sale was fraudulent and was only intended to transfer title to Joe temporarily to prevent Bank A from using the car to satisfy Bank A’s judgment.
To determine Jake’s actual intent, the court will look at the fact that Jake retained possession of the car and the fact that Jake received only $200 for a car that was worth way more than that. These two factors will weigh in favor of a determination of fraudulent intent.
Penalties & Punishment?
Usually this charge is a misdemeanor punishable by imprisonment in the county jail not exceeding one year, or by fine not exceeding $1,000, or by both that fine and imprisonment.
However, it can be charged as a felony where the property that was fraudulently conveyed consists of a stock in trade, or a part thereof, of a value exceeding $250. In this case, a defendant may be sentenced to 16 months, 2 years, or 3 years in state prison, with the judge having discretion to reduce the sentence to 1 year in county jail or a fine, or both.6
Next Steps If You Need Help
If you have been arrested and would like to learn more about how attorneys charge.
If you want to understand why its important to have an attorney represent you.
If you would like to discuss a pending case with an attorney contact the Aizman Law Firm at 818-351-9555 for a free confidential consultation.
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- 155. (a) Every person against whom an action is pending, or against whom a judgment has been rendered for the recovery of any personal property, who fraudulently conceals, sells, or disposes of that property, with intent to hinder, delay, or defraud the person bringing the action or recovering the judgment, or with such intent removes that property beyond the limits of the county in which it may be at the time of the commencement of the action or the rendering of the judgment, is punishable by imprisonment in a county jail not exceeding one year, or by fine not exceeding one thousand dollars ($1,000), or by both that fine and imprisonment.
- Elements. Pen. Code, §155.
- “Fraudulent conveyance”: Penal Code 155
- “Intent”: Penal Code 155.
- “Fraudulent Conveyance” defined: Civil Code 3439.04(b).
- See Pen Code §18, which states: (a) Except in cases where a different punishment is prescribed by any law of this state, every offense declared to be a felony is punishable by imprisonment for 16 months, or two or three years in the state prison unless the offense is punishable pursuant to subdivision (h) of Section 1170. (b) Every offense which is prescribed by any law of the state to be a felony punishable by imprisonment or by a fine, but without an alternate sentence to the county jail for a period not exceeding one year, may be punishable by imprisonment in the county jail not exceeding one year or by a fine, or by both.