Give your car to your brother, sell your business to a friend for a dollar, or move money into a trust before you file, and a bankruptcy trustee can undo the whole thing. Federal law lets the trustee reach back two years. Wisconsin law allows that stretch to four years.
What Counts as a Fraudulent Transfer
A fraudulent transfer is an unfair transaction that moves property out of a creditor’s reach. According to the Bankruptcy Code, there are two types of fraudulent transfers under 11 U.S.C. § 548:
- Actual fraud: This is when you transfer property with the intent to hinder, delay, or defraud a creditor. Here, intent is the key factor.
- Constructive fraud: This occurs when you receive less than the reasonably equivalent value of something while you are insolvent. No bad intent is necessary for this type of transfer. This can happen to honest people who sell low or give away assets without considering their debts.
Constructive fraud is more common than actual fraud, and it can happen without any intention to cheat.
How Far Back the Trustee Can Look
The federal window is two years before your filing date. However, that isn’t the real limit in Wisconsin.
Under 11 U.S.C. § 544, a trustee can borrow state law, and the Wisconsin Uniform Voidable Transactions Law (renamed from the Uniform Fraudulent Transfer Act by Wisconsin Act 246 in 2023) gives creditors four years to challenge a transfer. For actual fraud, the clock can instead run one year from the date the transfer was discovered. Property moved into a self-settled trust can be pulled back as far as ten years under § 548(e).
The “Badges of Fraud” Courts Watch For
Nobody admits to intentionally cheating a creditor, so courts look at the circumstances instead. § 242.04 of Wisconsin’s law lists factors that judges consider:
- The transfer went to a relative or someone with a close business relationship.
- You continued to use or possess the property after “selling” it.
- The transfer happened right before a significant debt became due.
- You received little or nothing in return.
- You moved nearly all of your belongings.
One factor alone rarely leads to a conviction. A combination of them can.
What It Can Cost You
The trustee can file a lawsuit to recover the property or its value under 11 U.S.C. § 550. If the asset is returned to the estate, it will be sold to pay the creditors. There are two possible outcomes:
- Your discharge may be denied, leaving you responsible for the debts that the bankruptcy was meant to erase.
- Deliberately hiding assets could lead to criminal charges of bankruptcy fraud.
An innocent transfer and a fraudulent one may look identical on paper. The difference often lies in how the facts are presented.
Talk to an Attorney Before You Transfer Anything
Most fraudulent transfer problems start months before filing, when someone tries to “protect” an asset without legal advice. If you’ve already made a transfer or are weighing one, timing and paperwork matter more than you’d expect. Kerkman & Dunn can review what you’ve done, tell you what a trustee would see, and structure your filing so it stands up. Contact us to schedule a consultation before filing, not after the trustee’s complaint arrives.
