Avoiding Fraudulent Conveyance In New York
Last updated on November 4, 2025
When you file for bankruptcy, a bankruptcy trustee may sell some of your assets to generate cash to pay your creditors. If, prior to filing, you sold or transferred assets specifically to keep them from being taken for the benefit of your creditors, the trustee has the right to investigate and cancel those transfers if they are found to be fraudulent conveyances.
What The Trustee Looks For
The law provides a specific period, known as the “look-back” period, during which a trustee can investigate property transfers:
- Any conveyance made within 90 days prior to your bankruptcy filing may be set aside by the trustee, regardless of intent.
- The New York fraudulent conveyance act allows a look-back period of one year if certain conditions suggest fraud.
A transfer within that one-year period may be deemed fraudulent if:
- The conveyance was made to a relative or business colleague.
- You intended to deprive creditors of the benefit that the sale of the asset would bring.
- You did not receive reasonable compensation for the property conveyed and one of the following is true:
- You’re insolvent at the time of the conveyance, or the transaction caused you to become insolvent.
- Your business became undercapitalized due to the conveyance transaction.
- You knew you would not be able to pay your debts.
These factors collectively suggest an improper attempt to shield assets from the bankruptcy estate.
What Makes A Conveyance Fraudulent?
It depends on your timing, your actions and your intentions. While it’s true that you are generally free to do what you want with your property, this freedom is restricted when bankruptcy is imminent.
Actual Fraud
The court considers a conveyance to be actual fraud if:
- The conveyance occurred within one year prior to the bankruptcy filing.
- The creditor challenging the conveyance can prove you conveyed the property with the intent to defraud creditors.
This type of fraud focuses entirely on the debtor’s deliberate motivation for the transfer.
Constructive Fraud
The court considers a conveyance to be constructive fraud if:
- You received less than the reasonable value of the property when you conveyed it.
- You couldn’t pay your debts at the time of the conveyance, or the conveyance transaction caused you to become unable to pay your debts.
Your intent is irrelevant to constructive fraud. This finding is based purely on the financial facts of the transaction.
The Importance Of Timing
Remember, timing counts. An asset transfer completed at least one year prior to filing for bankruptcy is not a fraudulent conveyance; it is generally considered asset protection.
Consequences Of Fraudulent Conveyance
When a conveyance is found to be fraudulent, the bankruptcy trustee can seize the property or its value from the new owner and include it in your bankruptcy estate to be used for the benefit of your creditors.
There are two exceptions where the property may be protected:
- If a bona fide purchaser bought your property without knowing of your creditors’ claims, the purchaser generally gets to keep the property.
- If contractors have improved the property without being paid, their mechanic’s liens are allowed to secure payments.
These exceptions are designed to protect innocent third parties who acted in good faith.
Get Legal Help To Avoid Costly Mistakes
If you intend to file for bankruptcy in New York, fraudulent conveyance is a serious concern to discuss with a qualified bankruptcy attorney.
Contact the Law Office of Gregory Messer online or at 347-943-8475 to schedule a free initial consultation. We serve residents throughout Brooklyn, the Bronx, Manhattan, Staten Island and Queens.
Our office is located across the street from the U.S. District Bankruptcy Court in Brooklyn. To ensure every client receives the personal attention they deserve, we are an appointment-only law firm with flexible hours adjustable to fit your needs.
We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.