A Study On Fraudulent Transfers

This paper focuses on the debtors' fraudulent transfers and the remedies for creditors. Nowadays, the debtor's fraudulent activities are rampant in China. A main reason is the lack of corresponding law. The study on the fraudulent activities and the protections of creditors are works with urgent and practical significance. Debtors' fraud is not a new topic and even in ancient Rome there was corresponding law to regulate it. Debtors' frauds are not only the stealing and hiding of their properties from the creditors but also the activities used to escape his liabilities by using legal doctrines. In this paper the latter will be paid more attention and the study on it is a theoretic one. Four kinds of frauds (bankruptcy discharge fraud, exemption property fraud, trust fraud, and limited liability fraud) will be analyzed and be stated as follows: Fraud in bankruptcy is carried on on two basic doctrines of the bankruptcy law. The first one is the discharge doctrine. It means that after the bankruptcy procedure an honest debtor will be discharged from his debts and the unpaid creditors can't ask the debtor to pay any more. The second one is the exempt property doctrine. In this doctrine the debtor is allowed to retain certain kind of property to support himself or his family lest he and his family become tramps or beggars. It shows the humanitarianism in bankruptcy law. But some debtors exploit these rules will make damages to the creditors. They can sell their properties at a very low price or even just give his properties to his relatives when he is with a heavy burden of debts, or hecan squander his property or convert them into exempt property and then give a bankruptcy application. According to the discharge and exempt rule, his creditors cannot be fairly paid. The law notices this disadvantage of the rules and seeks to give the creditors a proper remedy. That is the creditors' avoidance power. The creditors may use this power to revoke or avoid the fraudulent transaction. The property transferred may be recovered from the persons who get it and the dishonest debtors cannot be allowed to discharge from his liabilities. If the dishonest debtors can also get discharged and the property cannot be recovered, then it will be on the opposite of the goals of the bankruptcy law. And in most countries debtors' fraudulent transfer, and which is considered to be a serious crime, In this kind of fraudulent, the debtors may also be punished with penalty by criminal law. Trusts frauds play an important role in the common law countries, such as England and America. Many debtors apply the trusts rules to defraud the creditors. Because the trust property is considered to be isolated from the trust settler and the debtor may settle his property on trust. However, the beneficiary is regarded to be the true owner of the property, so when the debtor (also the trust settler) go into bankruptcy, his creditors cannot reach their hands to the trust property. This is injustice and the law allows the creditors to attack such a trust. As a result the property can be recovered to the bankruptcy property--------the estate and it can be used to pay the creditors. Besides the avoidance power constructive trusts are another efficient remedy to creditors and it has great importance, especially in England. The limited liability rule means that a shareholder's liability to the company islimited to the capital extent that he promised to contribute and if the company goes bankrupt the creditors cannot ask or sue the shareholder to pay from his private property. This rule has been firmly established in the 20th century. It thinks that the company is an independent legal entity and its property is strictly distinguished from that of its investors. It has a goal to protect the shareholders and to stimulate investment and the economic prosperity. But soon it was noticed that this rule also has a negative factor because it can be used to defraud the company's creditors. If the law refuses to give protection to the credit...