While winning a court judgment is satisfying, collecting on the judgment can be a difficult task. Sometimes, a debtor may attempt to avoid paying the judgment by transferring assets to friends or relatives. This can make collection a more complicated process, but Arizona’s Uniform Fraudulent Transfers Act provides the judgment creditor with several remedies.
What is a Fraudulent Transfer?
If the judgment creditor has determined that assets have been transferred to third parties, the next step is to show that the transfers were fraudulent. A.R.S § 44-1004 provides two methods for proving that a transfer is fraudulent.
The first way is to prove that the debtor gave away an asset without receiving reasonably equivalent value. In addition, there must be proof that the debtor either intended to incur debts beyond his ability to pay them or that the debtor was engaging in a transaction with unreasonably small assets in relation to the transaction. In other words, the debtor was insolvent or about to become insolvent after the transaction.
The other way to prove fraudulent transfer is by showing the debtor’s actual intent to hinder, delay, or defraud a creditor. In determining actual intent, consideration may be given to the following factors, which include but are not limited to: transfer to an insider, retaining possession or control of the asset after it was transferred, a transfer of substantially all of the debtor’s assets, and several other indicators of fraud.
The person who received the property can attempt to defend against seizure of the assets by showing that they took it in good faith and for a reasonably equivalent value. A.R.S § 44-1008.
Remedies After a Fraudulent Transfer
Once fraud is proven, a creditor has several remedies which are outlined in A.R.S § 44-1007.
First, they can receive a garnishment against the person who acquired the asset by fraud. A creditor can also undo the transaction and take the asset back from the transferee, or even get an attachment against other property of the transferee.
By scrutinizing asset transfers by the debtor, a creditor may be able to collect on a debt that was previously thought to be uncollectible. Consult with a debt collection attorney to determine if you can use the Uniform Fraudulent Transfers Act to reverse a transfer and collect your judgment.
Chernoff Law handles business and real estate matters throughout Arizona. Contact us by calling 480-719-7307 to discuss your case.