§3304 — Title 28 Judiciary and Judicial Procedure | U.S. Code

Summary

Unless section 3307 says otherwise, a person’s giving away property or taking on a debt can be treated as fraudulent against the United States when it hurts the government’s chance to get paid. A transfer or new obligation is fraudulent if the person did not get fair value back and was unable to pay their debts then or became unable to pay because of the transfer, or if the transfer was to an insider to pay an earlier debt when the person was insolvent and the insider had reason to think so. A transfer or obligation is also fraudulent (whether the government’s debt came before or after) if the person acted to hide, delay, or cheat creditors, or if they got no fair value and were leaving too few assets for a new business or planned to take on more debt than they could pay. To decide if someone meant to defraud, courts can look at things like transfers to insiders, keeping control of the property, hiding the deal, lawsuits nearby, giving away most assets, fleeing, hiding assets, getting little value in return, becoming insolvent around the transfer, transfers made just before or after big debts, or moving key business assets through a lienholder to an insider.

Title 28, §3304

Judiciary and Judicial Procedure — Source: USLM XML via OLRC

(a)Except as provided in section 3307, a transfer made or obligation incurred by a debtor is fraudulent as to a debt to the United States which arises before the transfer is made or the obligation is incurred if—

(1)(A)the debtor makes the transfer or incurs the obligation without receiving a reasonably equivalent value in exchange for the transfer or obligation; and

(B)the debtor is insolvent at that time or the debtor becomes insolvent as a result of the transfer or obligation; or

(2)(A)the transfer was made to an insider for an antecedent debt, the debtor was insolvent at the time; and

(B)the insider had reasonable cause to believe that the debtor was insolvent.

(b)(1)Except as provided in section 3307, a transfer made or obligation incurred by a debtor is fraudulent as to a debt to the United States, whether such debt arises before or after the transfer is made or the obligation is incurred, if the debtor makes the transfer or incurs the obligation—

(A)with actual intent to hinder, delay, or defraud a creditor; or

(B)without receiving a reasonably equivalent value in exchange for the transfer or obligation if the debtor—

(i)was engaged or was about to engage in a business or a transaction for which the remaining assets of the debtor were unreasonably small in relation to the business or transaction; or

(ii)intended to incur, or believed or reasonably should have believed that he would incur, debts beyond his ability to pay as they became due.

(2)In determining actual intent under paragraph (1), consideration may be given, among other factors, to whether—

(A)the transfer or obligation was to an insider;

(B)the debtor retained possession or control of the property transferred after the transfer;

(C)the transfer or obligation was disclosed or concealed;

(D)before the transfer was made or obligation was incurred, the debtor had been sued or threatened with suit;

(E)the transfer was of substantially all the debtor’s assets;

(F)the debtor absconded;

(G)the debtor removed or concealed assets;

(H)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;

(I)the debtor was insolvent or became insolvent shortly after the transfer was made or the obligation was incurred;

(J)the transfer occurred shortly before or shortly after a substantial debt was incurred; and

(K)the debtor transferred the essential assets of the business to a lienor who transferred the assets to an insider of the debtor.

Notes & Related Subsidiaries

Statutory Notes and Related Subsidiaries

Effective Date

Section effective 180 days after Nov. 29, 1990, and applicable with respect to certain actions for debts owed the United States pending in court on that

Effective Date

, see section 3631 of Pub. L. 101–647, set out as a note under section 3001 of this title.

§3304 Transfer fraudulent as to a debt to the United States

Summary

Title 28, §3304

Notes & Related Subsidiaries

Statutory Notes and Related Subsidiaries

Effective Date

Effective Date

Citations & Metadata