The Texas Uniform Fraudulent Transfer Act, almost always called TUFTA, is the primary statute creditors use against debtors who hide assets. It is found in Chapter 24 of the Texas Business and Commerce Code. This page walks through the statute in some depth because most of the questions that come up in practice (what counts as a transfer, who can sue, what the debtor’s financial condition has to look like at the time, what theories of liability are available, what timing rules apply) get answered in the statutory text itself.
There are two other Texas statutes that cover specific situations TUFTA does not reach as directly. Property Code Section 42.004 addresses the conversion of nonexempt assets into exempt personal property, a dodge that TUFTA’s general framework does not always catch. Family Code Sections 7.009 and 6.707 address divorce-specific manipulations of community property. Both are covered elsewhere on this site. This page is about TUFTA itself, which does most of the work in most of our cases.
What Counts as a “Transfer”
The statutory definition of “transfer” under TUFTA is broader than most readers expect. Section 24.002 defines it as every mode of disposing of or parting with an asset or an interest in an asset, direct or indirect, absolute or conditional, voluntary or involuntary. The drafters were comprehensive on purpose. A transfer does not need to be a sale or a deed; it can be any mechanism that moves value from the debtor to somebody else.
This breadth matters in practice because the situations that generate fraudulent transfer cases involve a wide range of mechanisms. Some are obvious: the debtor signs a deed conveying real estate to a spouse, or transfers ownership of an LLC to an insider. Others are not obvious until you parse the definition.
Payments of Money
A payment by the debtor is a transfer. When a debtor pays cash to an insider, such as a relative, a partner, or a company he runs, at a time when he owes other people, that payment falls within TUFTA’s scrutiny. The fact that the recipient may have been a real creditor of the debtor (rather than just somebody he wanted to give money to) does not move the payment out of the statute. It just changes which TUFTA theory applies. The insider-preference provision of TUFTA was written specifically to reach insider payments on antecedent debts when the debtor was insolvent.
Deeds and Title Transfers
The most visible category. Real estate deeded to a spouse, vehicles retitled to a child, business equipment moved to a new entity. These are documented in public records, which means the recipient sometimes hopes the public recording will make the transaction look legitimate. Recording does not legitimize a fraudulent transfer. It just makes the transfer easier for us to find.
Granting Liens
This is the category debtors and their counsel often overlook. Granting a lien or security interest is a transfer under TUFTA. When a debtor suddenly grants his brother a lien on his commercial real estate six weeks after a judgment hits, that lien is a transfer that TUFTA can void. The same applies to UCC-1 filings, deeds of trust, and any other security interest the debtor creates.
Transfers of Business Interests
LLC interests, partnership interests, contracts, customer lists, goodwill, accounts receivable, and the right to use a business name are all assets that can be transferred. The transfer of an operating business from an indebted entity to a newly-formed entity is one of the most common fact patterns we see, and TUFTA reaches every component of the transferred business.
The Two Theories: Actual and Constructive Fraud
TUFTA recognizes two distinct theories of liability. Which one applies depends on the facts, and many cases proceed on both theories simultaneously.
Actual Fraud Under Section 24.005(a)(1)
The actual fraud theory requires proof that the debtor made the transfer with the actual intent to hinder, delay, or defraud a creditor. Direct evidence of intent is rare. The debtor does not testify under oath that he moved the asset to dodge creditors. So TUFTA codifies a circumstantial proof framework, the “badges of fraud,” in Section 24.005(b). The statute lists eleven specific factors a court may consider in determining intent. They include whether the transfer was to an insider, whether the debtor retained possession or control of the asset after the transfer, whether the transfer was concealed, whether the debtor had been sued or threatened with suit before the transfer, and whether the debtor was insolvent or became insolvent shortly thereafter.
No single badge is determinative. Texas courts assess the totality. Three or four well-documented badges generally produce a viable actual-fraud claim. The page called “Did the Debtor Intend to Commit Fraud?” walks through all eleven in detail.
Constructive Fraud Under Section 24.005(a)(2) and 24.006
The constructive fraud theory requires no proof of intent at all. It requires two elements: a transfer for less than reasonably equivalent value, and the debtor in a particular financial posture at the time of the transfer. Under Section 24.005(a)(2), that financial posture takes two alternative forms. The debtor was either (i) engaged in or about to engage in a business or transaction for which the remaining assets were unreasonably small, or (ii) intending to incur, or believing or reasonably believing he would incur, debts beyond his ability to pay. A third route to constructive fraud, insolvency, comes from Section 24.006 rather than Section 24.005(a)(2), and is described next.
Section 24.006 provides a related theory specifically for present creditors. A transfer is fraudulent as to a present creditor if the debtor made the transfer without receiving reasonably equivalent value and was insolvent at the time or became insolvent as a result.
In either configuration, the constructive fraud theory does most of the heavy lifting in our practice. The proof lives in financial records, not in the debtor’s state of mind. The math either supports the case or it does not.
Present Creditors and Future Creditors
TUFTA distinguishes between creditors whose claims arose before the transfer and creditors whose claims arose after. Both can bring claims under the statute, but the available theories differ.
A present creditor, one whose claim existed when the transfer occurred, can pursue the full range of TUFTA theories, both actual and constructive fraud. Most of our clients fall into this category. The underlying debt was already owed when the debtor started moving assets.
A future creditor, one whose claim arose after the transfer, is limited to actual fraud under Section 24.005(a)(1), and only when the debtor’s intent reached future creditors he could see developing. The classic example is the debtor who deeds his property to his spouse the week before a lawsuit he knows is coming gets filed. The plaintiff in that lawsuit is technically a future creditor at the time of the transfer, but the debtor’s intent to defraud her is provable from the timing.
The split matters in practice mainly when our client’s debt arose late and the relevant transfers happened earlier. In those cases, we evaluate whether the actual fraud theory can carry the claim, because the constructive fraud route under Section 24.006 is not available.
What the Court Can Do
Section 24.008 sets out the remedies. They are broad. A court can void the transfer to the extent necessary to satisfy the creditor’s claim, attach the transferred asset or its proceeds, enter an injunction against further disposition, appoint a receiver, or grant any other relief the circumstances require. Section 24.009 limits the recovery from a good-faith transferee who gave value to the value given, but otherwise the remedies are wide. Section 24.013 makes attorney’s fees available to the prevailing party in the discretion of the court.
The page called “What Can a Court Do?” walks through each remedy in detail. The short version: a judgment is merely a piece of paper until somebody collects on it. TUFTA gives us the tools to collect.
Frequently Asked Questions
Does TUFTA apply to a transfer that happened before I got my judgment?
Yes. The four-year lookback under Section 24.010 runs from the date of the transfer, not the date of your judgment. Pre-judgment transfers are routinely reachable.
Does the debtor have to be insolvent for TUFTA to apply?
For the constructive fraud theory under Section 24.006, yes. Insolvency is one of three alternative financial states under Section 24.005(a)(2). For actual fraud under Section 24.005(a)(1), insolvency is one badge among eleven, not a required element.
Can TUFTA reach a transfer that was filed in the public records?
Recording does not legitimize a fraudulent transfer. We win cases involving recorded deeds and recorded liens regularly.
Is TUFTA the same as the Uniform Voidable Transactions Act?
The Uniform Voidable Transactions Act is the model statute many other states adopted as a renamed update. Texas kept the TUFTA name. The substantive operation is largely the same, though there are some differences in particular provisions.
Does TUFTA apply to a homestead?
A homestead is the debtor's property, so it is an asset, and a transfer of a homestead is a transfer under TUFTA. But the homestead exemption is generally separate from TUFTA's analysis, and most homestead questions get answered under Section 42.004 rather than under TUFTA directly. The "Converting Nonexempt Property" page covers the interaction.
What about a transfer between two companies the debtor controls?
That is exactly the kind of transfer TUFTA was written for. Moving assets from one of the debtor's controlled entities to another, for nothing or near nothing, while creditors are pressing, is a constructive fraud case before discovery starts.
Is granting a lien a transfer I can attack under TUFTA?
Yes. Section 24.002 defines a transfer as every mode of parting with an asset or an interest in an asset, and granting a lien or security interest fits that definition. When a debtor grants an insider a lien on his real estate shortly after a judgment hits, that lien is a transfer TUFTA can void. The same applies to a UCC-1 filing or a deed of trust.
My claim arose after the debtor moved the asset. Can I still sue?
You may be able to. A creditor whose claim arose after the transfer is a future creditor, and a future creditor is limited to the actual fraud theory under Section 24.005(a)(1). If the debtor moved the asset intending to defeat a creditor he could see coming, such as deeding property to a spouse the week before a lawsuit he knew was being filed, the timing can prove the intent. Whether your facts support that theory is what we assess at the outset.
Once we prove a fraudulent transfer, what can the court order?
Section 24.008 gives the court broad remedies. It can void the transfer to the extent needed to satisfy your claim, attach the asset or its proceeds, enter an injunction against further disposition, or appoint a receiver. Section 24.013 allows the prevailing party to recover attorney's fees in the court's discretion. A good faith transferee who gave value is protected to the extent of the value given under Section 24.009, but the remedies otherwise are wide.
TUFTA is a technical statute and this page is the plain-English version. Several of the provisions referenced above have exceptions and qualifications the page does not cover. Your specific situation needs specific analysis before you act on anything you read here.
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.