Florida Business Fraudulent Transfer Lawsuits: A Practical Guide for Creditors

Put simply, a Florida court can undo a transfer that a debtor made to keep a creditor from collecting. That is the core of a fraudulent transfer lawsuit Florida business owners should understand, and Chapter 726 of the Florida Statutes sets the rules.

You may be reading this because a debtor moved company or personal assets after a judgment was entered or a debt came due. The rules are technical, and some deadlines are short. This page is the responsibility of Eduardo A. Maura at Ayala Law PA, whose office is at 1646 W Snow Ave in Tampa, Florida.

What Florida Law Means by a Fraudulent Transfer

A fraudulent transfer is a move of assets that Florida law lets a creditor set aside. Older court opinions often call the same idea a fraudulent conveyance.

The statute defines “transfer” very broadly. It covers every way of giving up an asset or an interest in one, whether direct or indirect, voluntary or not. Fla. Stat. § 726.102 says a transfer includes payment of money, a lease, and creating a lien. A deed or a bank wire isn’t required.

Businesses fall within the rules too. The statute’s definition of “person” includes partnerships, corporations, and other commercial entities, so a company can be the debtor.

A judgment isn’t required before a claim exists. Fla. Stat. § 726.105 applies whether the creditor’s claim arose before or after the transfer. A claim includes a right to payment, even one that is disputed or not yet reduced to judgment.

Actual Fraud Versus Constructive Fraud

Actual fraud looks at what the debtor intended. Constructive fraud looks at whether the debtor received reasonably equivalent value and either had remaining assets unreasonably small for its business or transaction, or intended to incur, or reasonably should have believed it would incur, debts beyond its ability to pay as they became due.

Actual fraud. A transfer is fraudulent if the debtor made it with actual intent to hinder, delay, or defraud any creditor. § 726.105(1)(a) sets this test. Intent is hard to prove directly, so creditors usually rely on the surrounding facts.

Constructive fraud. A creditor doesn’t need proof of bad intent. Under § 726.106(1), a transfer is fraudulent as to a creditor whose claim arose before the transfer was made or the obligation was incurred if the debtor got no reasonably equivalent value and was insolvent at the time, or became insolvent because of it. § 726.105(1)(b) covers transfers made without receiving a reasonably equivalent value when the debtor’s remaining assets were unreasonably small for its business or transaction, or when the debtor intended to incur, or believed or reasonably should have believed it would incur, debts beyond its ability to pay as they became due.

Under § 726.106(2), a transfer made by a debtor is fraudulent as to a creditor whose claim arose before the transfer was made if the transfer was to an insider for an earlier debt, the debtor was insolvent at that time, and the insider had reasonable cause to believe the debtor was insolvent.

Creditors often raise both theories. They rely on different proof, so raising both keeps more options open.

Badges of Fraud Courts Look At

Badges of fraud are warning signs the statute lists for judging actual intent. A court can weigh them when it decides whether a transfer was meant to hinder or defraud creditors.

Fla. Stat. § 726.105(2) says a court may consider these factors, among others:

• The transfer was to an insider.
• The debtor kept possession or control of the property after the transfer.
• The transfer was disclosed or concealed.
• The debtor had been sued or threatened with suit before the transfer.
• The transfer was of substantially all the debtor’s assets.
• The debtor absconded, or removed or concealed assets.
• The value received was not reasonably equivalent to what was transferred.
• The debtor was insolvent, or became insolvent shortly after the transfer.
• The transfer happened shortly before or after a substantial debt was incurred.

A transfer to a relative the week after a demand letter raises different questions than the same transfer years earlier.

Timing and concealment are common points of focus. Board minutes, bank statements, deeds, and filing dates often show when things happened.

Business Transfers That Draw Scrutiny

Transfers from a company to its owners, relatives, or related businesses often draw the closest look.

Common examples include:

• A company pays a large distribution or bonus to an owner shortly after a lawsuit is filed.
• Equipment, receivables, or contract rights move to a new LLC run by the same person.
• Ownership interests pass to a family member with little or nothing received in return.

Business transfers like these are a common reason for a fraudulent transfer lawsuit Florida business creditors file.

The affiliate definition matters when the transferee is a related company. Fla. Stat. § 726.102 treats a person who directly or indirectly owns, controls, or holds with power to vote 20 percent or more of a debtor’s outstanding voting securities as an affiliate, other than a person who holds the securities as a fiduciary or agent without sole discretionary power to vote them, or solely to secure a debt if that person has not exercised the power to vote. Insider status can extend to affiliates, which can bring a related company into the analysis.

Many business cases start with a contract or construction payment fight. A subcontractor wins a judgment, then finds the contractor’s cash went to an owner’s account or a new entity. That’s when the question of where the money went becomes central.

Creditors also ask whether they can reach an owner through the company itself. In Wurtzebach v. Flooring Depot FTL, the Fourth District explained that a corporate veil is pierced only on a showing of improper conduct. That means proof the corporation was actually organized or used to mislead creditors or perpetrate a fraud on them. In Wurtzebach v. Flooring Depot FTL, Inc., this “showing of improper conduct” requires proof that “the corporation was actually organized or used to mislead creditors or to perpetrate a fraud upon them” (opinion).

What a Creditor Can Ask a Court to Do

A creditor can ask a court, subject to the statute’s limitations, to avoid the transfer to the extent necessary to satisfy the creditor’s claim, block further moves, and reach the asset to satisfy a debt.

Under § 726.108(1), subject to the limitations in s. 726.109, a creditor can obtain avoidance of the transfer to the extent needed to satisfy its claim. Courts can also order an attachment in accordance with applicable law, or, subject to applicable principles of equity and in accordance with applicable rules of civil procedure, an injunction against further transfers or a receiver to take charge of the asset. Subject to applicable principles of equity and in accordance with applicable rules of civil procedure, the statute allows any other relief the circumstances may require.

Corporate stock is reachable too. Fla. Stat. § 56.061 makes stock in corporations subject to levy and sale under execution.

Judgment creditors can also file judgment liens with the Florida Department of State. The Division of Corporations judgment lien overview explains the process.

Time Limits for Filing a Claim

Many claims must be filed within four years of the transfer, and one type has only one year. A claim that isn’t brought in time is extinguished.

Actual-intent claims under § 726.105(1)(a) cover transfers made with actual intent to hinder, delay, or defraud any creditor of the debtor; the filing deadline, four years after the transfer or, if later, one year after it was or could reasonably have been discovered, is set by § 726.110. Fla. Stat. § 726.110 sets these windows.

Constructive-fraud claims under § 726.105(1)(b) apply only where the debtor transferred or obligated itself without receiving a reasonably equivalent value in exchange and was engaged, or about to engage, in a transaction leaving unreasonably small remaining assets, or intended or reasonably should have believed it would incur debts beyond its ability to pay. The four-year window from the transfer or obligation is set by § 726.110.

Insider payment claims under § 726.106(2) cover a transfer made to an insider for an antecedent debt when the debtor was insolvent at that time and the insider had reasonable cause to believe it. The one-year window from the transfer is set by § 726.110.

Don’t wait to pull the records, because one-year windows can pass quickly. Checking these dates is the first step in any fraudulent transfer lawsuit Florida business case.

Defenses Transferees Commonly Raise

People who receive a transfer often argue the company got fair value, or that the move was a normal business decision.

Fair value is central. The statute lists whether the value received was reasonably equivalent as a factor a court may consider. § 726.105(2) Invoices, contracts, and payment records help show what changed hands.

Not every asset counts. Fla. Stat. § 726.102 leaves out property to the extent a valid lien encumbers it, property generally exempt under nonbankruptcy law, and an interest in property held in tenancy by the entireties to the extent a creditor with a claim against only one spouse cannot reach it. A transferee may argue a lien already covered the asset.

Business reasons come up too, such as a reorganization or a sale to a new owner.

Protecting Your Position and Talking Through Your Facts

Putting your facts in writing, with dates and documents, is the first practical step.

Start with the judgment or debt papers, along with any demand letter or suit papers. Gather deeds, bank statements, company minutes, operating agreements, and state entity filings.

Write down when each transfer happened, who received it, and how you learned of it. Keep copies of everything, including messages that mention the move. Avoid new transfers of the same assets while the facts are reviewed.

Whether a particular transfer can be challenged depends on the facts and the documents. That’s where a review of your situation starts.

Frequently asked questions