Is the value fair?
The basic question in a Texas Fraudulent Transfer matter is whether or not the asset was transferred for a fair value.
A value is fair if both sides of the transfer are relatively equal. Selling an asset valued at $100,000 to your father for $10,000 is not going to pass the test. The typical fraudulent transaction we see is a debtor who transfers his business to a new entity. It’s not uncommon to see a debtor transfer all his business activity to a new company owned by the spouse, or business partner. Frequently, the outcome of that transaction when we are done with them is that the spouse or partner winds up with a judgment against them for engaging in the transaction.
So a transfer is fraudulent if the debtor made the transfer for an unfair value and the debtor either:
1. Was engaged in, 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
2. Knew or intended that the debtor would incur debts that could not be paid as they became due.
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