Fraudulent Conveyances in California: What Business Owners and Creditors Need to Know
Most people who come to us asking about "fraudulent conveyance" are describing something they saw happen: a debtor loses a lawsuit, and suddenly the house is in the spouse's name, or the business assets have moved into a brand-new LLC. The bank account that had money in it last month is empty now.
Here's a wrinkle worth knowing up front: California hasn't called this a "fraudulent conveyance" in its own statute since 2016. The law is now the Uniform Voidable Transactions Act, tucked into Civil Code section 3439 and the sections that follow it. It replaced the old Uniform Fraudulent Transfer Act, and the swap matters more than you'd think — transfers made before January 1, 2016 are still judged under the old law, while anything after that date falls under the new one. If you're dealing with an older transfer, don't assume the current statute controls.
Old name or new, the idea is the same: the law gives creditors a way to unwind a transfer that was designed, or that just happens to have the effect of, putting a debtor's assets out of reach.
Two Ways to Prove It
California recognizes two separate theories, and they work very differently.
Actual fraud is what most people picture — a debtor who moved money or property specifically to keep it away from a creditor. Civil Code § 3439.04(a)(1) covers this, but proving someone's actual intent is hard. Nobody writes it down. So courts lean on circumstantial evidence, and the statute itself lists eleven factors (the "badges of fraud") that tend to show up together when something's off: the transfer went to a family member or related business, the debtor kept using the property after supposedly giving it away, the transfer happened right after a lawsuit was filed or threatened, the debtor got little or nothing in return, or the debtor was already in financial trouble at the time. No one factor proves the case, but when you see three or four of them stacked up, it starts to look less like coincidence.
Constructive fraud is the other route, and honestly it's the one creditors' attorneys reach for more often, because you don't have to get inside anyone's head. Under §§ 3439.04(a)(2) and 3439.05, a transfer can be voidable simply because the debtor didn't get reasonably equivalent value for it and was insolvent at the time — or became insolvent because of it. California measures insolvency two ways: either liabilities exceed assets on paper (the balance sheet test), or the debtor just isn't paying bills as they come due (the cash-flow test). This theory is what usually applies when someone transfers property to a relative for a dollar, or "sells" a company asset to an affiliated entity at a price that doesn't hold up.
The Clock Is Running, Even If You Don't Know It Yet
Section 3439.09 sets the deadlines, and they're less forgiving than people expect:
Actual fraud: four years from the transfer, or one year from when you discovered it (or should have), whichever gives you more time.
Constructive fraud: a flat four years from the transfer date — no discovery extension.
And no matter what: seven years after the transfer, the claim is dead. Full stop. This outer limit applies even if you had no way of knowing the transfer happened.
That seven-year cutoff catches people off guard. If you're a creditor and you suspect something happened years ago, don't wait to find out whether you're still inside the window.
What You Can Actually Get
Assuming a court agrees the transfer was voidable, § 3439.07 gives you real tools — not just a finding on paper. You can unwind the transfer itself, get an attachment on the asset, ask for an injunction to stop the debtor from moving it further, have a receiver appointed, or in some cases get a straight money judgment against whoever received the asset or benefited from it.
That said, the law isn't out to punish people who had nothing to do with the scheme. Someone who bought the property in good faith and actually paid fair value has real defenses under § 3439.08. The statute is aimed at the debtor's conduct, not at every person who ever touched the asset afterward.
Where I See This in the Real World
This isn't an abstract statute — it comes up constantly:
A judgment debtor deeds the house to a spouse the week after losing at trial
A business owner facing a lawsuit quietly moves the company's equipment and receivables into a new LLC
Someone doing "estate planning" transfers assets to their kids without accounting for a creditor claim they can already see coming
A business owner tries to do legitimate asset protection, but does it after a claim is already on the horizon — which is exactly the timing that draws scrutiny
That last point is the one I'd underline for business owners: legitimate asset protection planning is absolutely a real thing, and it's smart. But it has to happen before there's a claim, or even a reasonably foreseeable one — not after. Timing is often the single biggest factor in whether a transfer holds up or gets unwound.
Bottom Line
Whether you're the creditor trying to chase down assets that disappeared, or a business owner who wants to structure something the right way, the same advice applies: get counsel involved early. These cases turn on facts — what was paid, when, to whom, and what the debtor's financial picture looked like at the time — and the deadlines don't wait for you to figure that out on your own.
This post is for general information only and isn't legal advice. If you're facing a specific transfer issue, talk to a lawyer about your situation — contact Apricity Law if you'd like to start that conversation.