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After a break for the holidays, this is the third of an expected
five-part series on fraudulent transfers. In my first blog, I laid out the basic
statutory framework, as well as a described generally the
difference between actual and constructively fraudulent transfer.
In the second blog, we took a
detailed look at the elements of a fraudulent transfer under both
the Bankruptcy Code as well as Texas law. In this third
installment, we will take a deeper dive into the badges of fraud
that courts use to analyze the existence of actual fraudulent
intent.
As we discussed in the last installment, one of the elements of
an actual fraudulent transfer under either the Bankruptcy Code or the Texas Uniform Fraudulent Transfer Act
(“TUFTA”) is that the debtor transferred
assets with actual intent to hinder, delay, or defraud any of the
debtor’s creditors. Whether a transfer was made with actual
fraudulent intent is a fact question. Given that direct evidence of
actual intent is rarely available (no one is going to readily admit
that they intended to defraud their creditors), courts typically
rely on circumstantial evidence, known as badges of fraud, to infer
intent. Badges of fraud have been described as bridges that connect
“questionable acts commonly associated with fraud to findings
of actual fraudulent intent.” 5 Collier on Bankruptcy…
