When a Debtor Hides Assets: Fraudulent Transfers and Proceedings Supplementary in Florida

You have a judgment, and the debtor has nothing. On paper. The company that owed you stopped operating the month after you sued, and a new company with a similar name, the same owner, the same phone number, and the same customers opened at the same address. Or the individual who owes you deeded a rental property to a brother for a nominal sum, moved an investment account into a spouse's name, and now fills out the financial disclosure form with a shrug.

Florida law anticipated this. Two tools work together against it: the fraudulent transfer statute, which lets a creditor undo transfers made to avoid paying, and proceedings supplementary, which bring the people now holding the assets into the case the creditor already has. Both reward the creditor who moves while the trail is fresh.

What makes a transfer fraudulent?

Florida's Uniform Fraudulent Transfer Act recognizes two kinds. The first is a transfer made with actual intent to hinder, delay, or defraud a creditor. The second requires no bad intent at all: a transfer for which the debtor did not receive reasonably equivalent value, made while the debtor was insolvent or leaving the debtor insolvent. A gift of a building to a relative by an insolvent owner is the standard example. The creditor does not need to have held a judgment when the transfer happened. A claim that existed at the time, including a disputed one, is enough, and some transfers can be attacked by creditors whose claims arose later.

How do you prove intent when nobody admits it?

With circumstances. The statute lists the factors courts consider, traditionally called badges of fraud. The transfer went to an insider: a relative, a business partner, or an affiliated company. The debtor kept possession or control of the property afterward. The transfer was concealed. The debtor had been sued or threatened with suit before making it. It covered substantially all of the debtor's assets. The debtor received far less than the property was worth. The debtor was insolvent, or became so soon after. The transfer came shortly before or after a large debt arose. Several of these together support an inference a court can act on. The proof is usually a timeline: the date of the demand letter, the date the lawsuit was served, and the date on the deed.

What can a court do about it?

It can set the transfer aside to the extent needed to satisfy the creditor's claim, so the asset can be levied on as if it had never moved. It can freeze the asset with an injunction, attach it, or appoint a receiver to take control of it. It can allow the creditor to execute on the asset, or its proceeds, in the recipient's hands. And it can enter a money judgment against the person who received the property, up to the lesser of the asset's value and the amount of the claim. A buyer who paid reasonably equivalent value in good faith is protected. A relative who took the property for nothing is not.

What are proceedings supplementary?

They are Florida's procedure for continuing the hunt inside the existing case. A creditor holding an unsatisfied judgment files a motion and an affidavit saying so. The court can then order the debtor to appear and be examined about assets. More important, when the creditor describes under oath property of the debtor held by someone else, the court issues a notice directing that person to appear and explain why the property should not be applied to the judgment. The third party must respond under oath by a deadline. Fraudulent transfer claims against that party are added by a supplemental complaint in the same case, before the judge who already knows the history. The court can also charge the debtor with the creditor's costs and attorney's fees for the proceedings.

What about a new company that looks just like the old one?

Courts look past the new name. When a successor business has the same owners, the same management, the same location, and the same customers as the one that owed the debt, and the old company's assets moved to it without fair payment, Florida law can treat the new company as a mere continuation of the old one and hold it liable for the debt. Related theories reach an owner personally when the corporate form was used to mislead creditors, though Florida courts require proof of improper conduct before disregarding a company's separate existence. The evidence is rarely hidden: state filings, websites, phone numbers, employee lists, bank records, and emails telling customers that only the name has changed.

Which transfers are beyond a creditor's reach?

Not every disappointing transaction is a fraud. A debtor who pays one legitimate creditor ahead of another has usually done nothing the statute reaches, unless the creditor paid was an insider. Sales for fair value to good-faith buyers stand. Florida's homestead protection is strong enough that it generally survives even when a debtor put money into a home to keep it from creditors, with an exception for funds obtained by fraud. And the clock runs. Most claims must be brought within four years of the transfer; claims based on actual intent can also be brought within one year after the transfer was or could reasonably have been discovered; and claims over preferential payments to insiders expire after one year.

What should a creditor do when assets start moving?

Start before the judgment if the signs appear during the lawsuit: the transfer itself can be challenged in the pending case, and a court can enjoin further transfers on a proper showing. After judgment, record the liens immediately, serve the fact information sheet, take the debtor's deposition, and subpoena bank records to trace where money went. Search the public records for new deeds and newly formed companies. Keep every demand letter and email, because they fix the date the debtor knew a claim was coming. Then move for proceedings supplementary while the people who received the assets still have them.

Salomon Smith PLLC represents creditors pursuing judgment debtors who have moved assets, through fraudulent transfer claims and proceedings supplementary across South Florida. If a debtor's assets vanished when your claim appeared, call (305) 297-1018 for a free consultation, or learn more about our commercial collections practice.

This article is for general informational purposes only and is not legal advice.