Suppose a negligent driver collides with your car and you are badly injured; further suppose that the other driver has minimal liability insurance of $25,000. You sue the other driver and obtain a money judgment for $500,000. The insurance company pays you $25,000 and you are left attempting to collect the remaining $475,000 from the other driver’s personal assets.
The other driver, trying to stay one step ahead of you, has already deeded his house over to his mother; so that by the time you try to collect from him, he no longer owns the house. Can he do this? Is the house beyond the reach of your money judgment?
Enter the Pennsylvania Uniform Fraudulent Transfer Act. Among other things, the Act provides that a debtor may not transfer an asset with an intent to defraud a creditor or under circumstances where the debtor is insolvent and does not receive reasonably equivalent value in exchange for the asset.
In our example, the offending driver conveyed his house to his mother just before you obtained your money judgment against him. Since you had a pending claim you would be deemed a “creditor” under the Act and would be protected by its provisions. If the other driver did not receive cash or other assets of equal value from his mother in exchange for the property, the transfer of the house could be set aside by the courts; and you would be allowed to obtain satisfaction of your judgment from the proceeds of the house. The courts might also deem the transfer to a close relative without consideration to be evidence of intentional fraud, which would also allow the transfer to be set aside.
What if the other driver actually received cash from his mother equal to the value of the house? In that case, the transfer could not be set aside, but you would have the right to seek execution against the cash received from the mother. This assumes, of course, that “sonny boy” still has it.
Like the old adage “you can’t take it with you,” the Act adds the caveat “you can’t give it away either”, at least not when you haven’t paid your bills!
– Kevin Palmer