One issue that has come before the Supreme Court is what is actual fraud, and does actual fraud included fraudulent transfers. Stated in another way, is it fraud to accept a fraudulent transfer. For a long time the answer depended on the judicial circuit. Now the Supreme Court has provided a firm answer.
So before we can determine the importance of the Supreme Court’s decision it is important to understand what actual fraud is in the context of bankruptcy law. The bankruptcy code bars the discharge of “any debt… for money, property, [or] services… to the extent obtained by… false pretenses, a false representation, or actual fraud.”
So how does the reception of fraudulent transfers fit within this definition of actual fraud?
The first step in answering this question is to determine how fraud is defined. The modern law concerning fraudulent transfers comes from the Uniform Fraudulent Transfers Act (UFTA), which was adopted in most states including Florida. The UFTA defines fraudulent transfers against present and future creditors as “a transfer made under obligation incurred by a debtor if made with actual intent to hinder, delay or defraud any creditor of the debtor.”