The transferee is the person who received the fraudulently transferred asset. The wife who took the deed. The brother who took the business. The partner who took the equipment. The shell company that took the receivables. They are not just witnesses. They are not just leverage on the debtor. Under TUFTA, they are defendants in their own right.
The single most useful thing about Texas fraudulent transfer law is that we can sue the people who helped the debtor hide, and we can get a personal money judgment against them for what they took.
The Transferee Is Personally Liable
When a court finds a transfer was fraudulent, the transferee owes the value of what they received. This is a personal judgment against them, enforceable against their bank accounts, their investment accounts, their non-homestead real estate, and any other asset they own that is not exempt.
The transferee may have walked into the transfer thinking they were doing the debtor a favor. By the time we have served them with the lawsuit and started post-judgment discovery on their own finances, the favor looks different.
The Amount of the Judgment
The judgment against the transferee is generally for the lesser of two numbers. The value of the asset at the time of the transfer, or the amount of the creditor’s underlying claim. The transferee is not on the hook for more than they actually received.
What If the Asset Has Gone Up in Value?
The general rule is that the value is fixed as of the date of the transfer. The transferee does not get punished for market appreciation, and the creditor does not get a windfall from it.
What If the Transferee Made Improvements?
A transferee who put real money into preserving or improving the asset (paying taxes, making necessary repairs, paying down a legitimate lien) may be entitled to credit for those expenses against the judgment. The credit is limited, and it does not save a transferee who accepted the asset in bad faith.
The Good Faith Defense
The transferee can try to defend on the ground that they took the asset in good faith and gave reasonably equivalent value for it. This is the main defense available, and it is harder to win than it sounds.
To get there, the transferee must prove both halves of the test. Good faith means they did not know, and had no reason to know, that the transfer was fraudulent. Reasonably equivalent value means they actually paid something close to fair market value.
Insiders almost never win on this defense. A debtor’s spouse, business partner, or adult child has a steep hill to climb when they claim they had no idea about the debtor’s financial trouble. Courts assume that close relationships come with knowledge of each other’s affairs, especially when the transaction was struck for nothing or for a fraction of fair value.
A genuine arm’s-length buyer who paid market price and had no connection to the debtor can win on this defense. They are also pretty rare in the cases that come across our desk.
First Transferees and Subsequent Transferees
Fraudulent transfers sometimes move through more than one set of hands before they come to rest. The analysis applies to each step in the chain, but the parties at different positions in the chain have different exposures and different available defenses.
The First Transferee
The person who received the asset directly from the debtor is the first transferee. They are the most exposed. The fact that they took the asset directly from a debtor in financial trouble is the core of the case.
Subsequent Transferees
If the first transferee then handed the asset off to somebody else, that next person is a subsequent transferee. They are liable too, unless they can show they took the asset in good faith and for value. Subsequent transferees have a more practical good faith defense than first transferees, because the chain creates distance from the original fraud.
A genuine third-party buyer who paid market price at the end of a long chain may be protected. But the first transferees in the chain, the ones who actually helped the debtor hide, remain on the hook even if the asset has moved further on.
What Litigation Against a Transferee Looks Like
The transferee gets named in the lawsuit, served, and required to answer. From there, we conduct discovery on their knowledge of the debtor’s financial situation, the nature of their relationship to the debtor, what they actually paid for the asset (if anything), and what they have done with the asset since.
Depositions of the transferee are often the most productive part of the case. The transferee and the debtor frequently give conflicting accounts of what happened: different stories about when the loan started, different numbers for the consideration, different explanations for the timing. Those conflicts are evidence.
Settlement usually comes once the transferee sees what continued fighting will cost. Many transferees walk into the case thinking they will hold the line for the debtor and walk out paying.
Frequently Asked Questions
Does the transferee have to have known about the fraud?
No. Under the constructive fraud theory, the transferee's knowledge is not an element of the case. Their knowledge becomes relevant if they raise the good faith defense, but the burden is on them to prove good faith, not on us to prove bad faith.
What if the transferee is broke?
A judgment against a broke transferee may not get collected in the short term, but it follows them. We have collected on judgments years after they were entered, when the transferee finally came into money. And in the meantime, the debtor's own assets remain reachable.
Can the transferee just give the asset back?
Sometimes that ends the case quickly. If the transferee returns the asset and the creditor is made whole, we may not pursue them further. If the asset has lost value or been encumbered, the transferee may still owe the difference.
What if the transferee is a corporation the debtor controls?
That is one of the easiest cases. The corporation gets a judgment against it, and the debtor's ownership of the corporation does not shield him. We pursue the corporation's assets, and we use discovery to pierce the relationship between the debtor and the entity.
Can multiple transferees be sued together?
Yes, and we usually do. Naming everyone in the chain in one lawsuit keeps the case efficient and prevents the defendants from pointing fingers at people who are not in the room.
What if the transferee dies?
The claim survives the transferee's death. We pursue the estate, and we pursue any heirs or beneficiaries who received the asset through inheritance. The TUFTA cause of action does not extinguish with the death of the defendant.
This is the plain-English version of the rules on transferee liability. There are exceptions, special cases, and edge issues the page does not get into. Every case has its own facts, and your situation needs a lawyer's look before you decide what to do.
The Texas Fraudulent Transfer Statutes are complicated affairs. These pages are meant to explain the law in terms that are as simple as we can make them. Sometimes we have ignored limited exceptions and other quirks in the law so that the general concepts could be conveyed clearly. Your situation needs to be carefully analyzed. No two situations are identical and you need legal advice before making an important decision. Use this website as a guide only.