After a break for the holidays, this is the third of an expected five-part series on fraudulent transfers. In my first blog, I laid out the basic statutory framework, as well as a described generally the difference between actual and constructively fraudulent transfer. In the second blog, we took a detailed look at the elements of a fraudulent transfer under both the Bankruptcy Code as well as Texas law. In this third installment, we will take a deeper dive into the badges of fraud that courts use to analyze the existence of actual fraudulent intent.
As we discussed in the last installment, one of the elements of an actual fraudulent transfer under either the Bankruptcy Code or the Texas Uniform Fraudulent Transfer Act (“TUFTA”) is that the debtor transferred assets with actual intent to hinder, delay, or defraud any of the debtor’s creditors. Whether a transfer was made with actual fraudulent intent is a fact question. Given that direct evidence of actual intent is rarely available (no one is going to readily admit that they intended to defraud their creditors), courts typically rely on circumstantial evidence, known as badges of fraud, to infer intent. Badges of fraud have been described as bridges that connect “questionable acts commonly associated with fraud to findings of actual fraudulent intent.” 5 Collier on Bankruptcy ¶ 548.04(1)(b) (16th 2022).
The Bankruptcy Code does not explicitly list badges of fraud, but the Fifth Circuit has recognized the…
