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

Summary

A transfer of property or taking on a new debt can be treated as fraudulent when someone who owes money to the United States does it to avoid paying. It is fraudulent if the person gives up something without getting fair value and is unable to pay their debts, or becomes unable to pay because of the transfer. It is also fraudulent if the person, while unable to pay, gives property to a close associate (an insider) to cover an older debt and that insider knew the person was insolvent. A transfer or new obligation is also fraudulent whether the government’s claim existed before or after the move if the person acted with a real plan to hide, delay, or cheat creditors, or if they gave away property for less than fair value while leaving too few assets for the business or while planning to take on debts they could not pay. To decide if someone meant to cheat, courts look at factors like transfers to insiders, keeping control of what was given away, hiding the deal, pending lawsuits, moving or hiding assets, giving up almost all assets, getting little value back, becoming insolvent soon after, timing near big debts, or shifting key assets through others to insiders.

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