Fraudulent Conveyance

A debtor, although insolvent or in failing financial circumstances, can prefer one or more of his creditors by paying these persons first, provided no fraudulent intent exists to cheat the other creditors. The debtor's motives for a preference among the creditors are immaterial unless they establish fraudulent intent. The property transferred must not unreasonably exceed the amount of the claim, and the transaction must not provide for special benefits to the creditor. A debtor can give a preference to his creditors because as absolute owner of his PERSONAL PROPERTY, the debtor can do with it as he pleases, as long as the law is not violated. By law, however, certain debts—such as those owed to the United States, or debts created by secured transactions—must be satisfied before any others.

The existence of a family relationship between the debtor and preferred creditor does not, in itself, affect the validity of a preference. The relationship between the parties is just one factor to be considered, and is given commensurate weight, along with other factors, in determining the GOOD FAITH of the transaction. A transaction involving a family relationship, however, will be more closely examined than if it had taken place between strangers.