One of the first things people ask when they call us is whether they have to wait until they have a judgment to bring a fraudulent transfer claim. The short answer is no. You do not need a judgment. Not even close.
TUFTA was written to give creditors a head start, not to make them wait until after the debtor finishes hiding his assets. If somebody owes you money, you almost certainly qualify as a creditor under the statute.
What Makes You a Creditor
You are a creditor under TUFTA if somebody owes you money, or owes you something else of value, and your right to be paid exists. The right does not have to be:
Confirmed by a court. Disputed-free. Mature. Fixed in amount. Or even fully formed. The statute uses the word “claim,” and the definition of claim is about as broad as it gets.
We have brought fraudulent transfer cases for clients who were still negotiating with the debtor when the debtor started moving assets. We have brought them for clients who held an unpaid promissory note that had not yet come due. We have brought them for clients who had been handed a bad check the week before.
The law is deliberately wide on this point. Debtors do not wait for judgments before they start hiding. The law does not make creditors wait either.
Present Creditors and Future Creditors
TUFTA splits creditors into two groups based on the timing of the debt relative to the transfer. The split is mostly a matter of which theories of liability are available, not whether the creditor can sue at all. Both groups can bring claims under the statute.
Present Creditor
You are a present creditor if your claim against the debtor existed before he made the transfer. This is the stronger position. You can pursue both the actual fraud theory (proving the debtor meant to cheat) and the constructive fraud theory (showing he transferred for less than fair value while insolvent). Most of our clients are in this category.
Future Creditor
You are a future creditor if your claim came into existence after the transfer. This is harder, but it is not hopeless. If we can show the debtor made the transfer specifically with the intent to defraud creditors he saw coming, like the lawsuit he could see being filed or the contract dispute about to break down, you still have an actual fraud claim.
The classic example: the debtor knows he is about to be sued. He deeds his commercial property to his wife the week before the petition gets filed. He was the only one who knew, but his intent to put assets beyond the reach of the coming creditor is visible from the timing alone.
What Kind of Debt Qualifies
Virtually any kind of debt qualifies. The categories below cover most of what comes through our office, but they are not exhaustive: the statutory definition of “claim” reaches well beyond any list we could put together.
Unpaid invoices and trade accounts. Personal guarantees. Promissory notes, both due and not yet due. Deficiency balances after a foreclosure or repossession. Breach-of-contract claims from collapsed business deals. Construction and subcontractor disputes. Tort judgments, including personal injury, property damage, and malpractice. Disputes between partners after one of them strips a company on the way out. Common law fraud claims.
The underlying debt does not have to be tidy. It can be hotly disputed by the debtor. It can be partially settled. It can be contingent on something happening down the road. The fraudulent transfer claim runs on its own track.
The Real Question Is What the Debtor Did
We get a lot of calls from people worried that their claim is “not the right kind” for TUFTA. Almost always, the worry is misplaced. The question that limits fraudulent transfer cases is rarely whether the creditor qualifies. The questions that actually limit the case are different:
What was transferred. When the transfer happened. To whom. And whether we can prove what needs to be proved.
If you have a debt and the debtor has been moving assets, call us before you assume you do not qualify. The answer is almost always yes.
Frequently Asked Questions
I am still in the middle of a lawsuit against the debtor. Can I sue for fraudulent transfer now too?
Yes. You can pursue the fraudulent transfer claim while the underlying lawsuit is still pending. We file the two cases together where the facts call for it.
The debtor denies he owes me anything. Does that matter?
No. The debtor's denial does not stop a TUFTA case. Many of our cases run with the underlying debt actively in dispute. The two tracks proceed in parallel.
What if only part of the debt is clear and the rest is disputed?
The undisputed part is your claim. The disputed part may also qualify depending on the facts. We work the case from whatever piece is solid.
Can a business be a creditor for TUFTA purposes?
Yes. The definition of "person" in TUFTA includes corporations, partnerships, LLCs, and other business entities. Most of our creditor clients are businesses.
What if I was defrauded? Does my common law fraud claim qualify?
Yes. A fraud claim is a "claim" under TUFTA. The fraud claim and the fraudulent transfer claim are independent and often pursued together.
What if I have a claim against the debtor's company, but his company is judgment-proof?
The fraudulent transfer claim can reach the assets the company transferred to the debtor personally, to the debtor's other companies, or to insiders. The judgment-proof posture of the direct defendant is often what makes the fraudulent transfer case worth filing.
My claim is from a contract that has not been fully performed yet. Do I still qualify?
If you have a right to payment under the contract, even contingent or unmatured, you have a claim under TUFTA. The definition is that broad.
TUFTA's creditor definition is broad, but it is not unlimited. Some unusual kinds of claims have technical wrinkles. The right answer for your situation depends on facts a lawyer needs to look at before you commit to a course of action.
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.