We hear this regularly, usually delivered with some resignation. “I found out about the transfer, but the asset has already been sold. I guess there is nothing I can do.” There is still plenty you can do. The asset being gone changes the form of the remedy. It does not eliminate the case.
A Money Judgment Against the Transferee
When the transferred asset has been sold, spent, dissipated, or otherwise made unavailable, a Texas court can enter a money judgment against the person who received it. The amount is based on the value of the asset at the time of the transfer.
A debtor transferred a commercial property worth $600,000 to his business partner two years ago. The partner sold the property a year later and spent the proceeds. The property is gone. The partner still owes us a personal money judgment for the value of what he received. The property being unavailable is not a defense.
That judgment is enforceable against the transferee’s own assets. Their bank accounts. Their other real estate. Their investment accounts. The remedy for a missing asset is going after the transferee personally.
What About Changes in Value?
The judgment is generally based on the value at the time of the original fraudulent transfer. Market appreciation does not get charged to the transferee. Market depreciation does not benefit them either.
Courts can adjust for legitimate improvements the transferee made to the asset: necessary repairs, taxes paid, costs of preservation, payment of legitimate prior liens. These adjustments are narrow. They do not insulate a bad-faith transferee from meaningful liability.
The Transferee Cannot Just Plead Poverty
A transferee who received the asset, sold it, and then ran through the proceeds cannot use present insolvency as a complete defense. A money judgment follows them regardless of what they did with the funds.
We enforce judgments against transferees the same way we enforce any other money judgment. Writs of execution. Garnishments of bank accounts. Abstracts of judgment to attach to real estate. Post-judgment depositions to find what they still have. The same collection tools that get a debtor’s attention work on a transferee.
Tracing the Proceeds
Sometimes the asset was sold, but the proceeds did not just disappear. The transferee used them to buy other property. A new house, an investment, a business, a vehicle. We trace those proceeds, and the new property may be reachable under a constructive-trust theory.
The constructive trust treats the new property as if it were held for the benefit of the defrauded creditor, to the extent of the fraudulent transfer that funded the purchase. The new house may not be exempt as a homestead if it was bought with the proceeds of a fraudulent transfer.
Do Not Give Up Too Early
The most common mistake creditors make in these situations is giving up before they should. The asset is gone. The debtor looks judgment-proof. The transferee is pleading poverty. We have heard all of it. We have also collected real money for clients in all of those situations.
Judgment-proof is just a word. It is what defendants say to make you go away. It is rarely the whole truth.
A judgment against the transferee is a long-term asset for the creditor. It accrues post-judgment interest. It survives. We have collected on judgments years after they were entered, when the transferee finally came into money: an inheritance, a settlement, a successful new venture. The judgment was waiting.
Frequently Asked Questions
What if the transferee sold the asset to an innocent third party?
The innocent third-party buyer is generally protected if they paid market value and had no reason to know about the underlying fraud. The protection runs only to them. The transferee who sold the asset is still liable for the value received.
What if the asset was destroyed rather than sold?
The case continues. The transferee is liable for the value of what they received, regardless of how the asset disappeared. The fact that they let it deteriorate or destroyed it does not absolve them.
What if the transferee is judgment-proof?
A judgment against a presently judgment-proof transferee is not worthless. It can be renewed. It accrues interest. It follows the transferee. People who look broke today often have collectible assets in five years.
Can we still get attorney's fees if the asset is gone?
Yes. The TUFTA fee-shifting provision applies whether the remedy is voidance or a money judgment. A prevailing creditor can recover fees from the transferee.
What if multiple assets were transferred, some still available and some already sold?
We pursue both remedies in parallel. Voidance for the assets that still exist. Money judgments for the ones that do not. The case combines them into a single recovery effort.
What if the transferee filed bankruptcy?
The transferee's bankruptcy adds layers, but a judgment for fraudulent conduct may be non-dischargeable. We pursue both the underlying claim and a non-dischargeability finding under Section 523 where the facts support it.
How long after the asset disappears can we still file?
The four-year TUFTA window runs from the date of the original fraudulent transfer, not from the date the asset was sold. The disappearance of the asset does not start a new clock, but it does not stop the old one either.
The rules around money judgments against transferees, tracing proceeds, and constructive trusts have technical edges this page does not cover. Specific facts get specific answers. A lawyer should look at your case before you assume what is available.
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.