If you sell an asset for less than its fair value, the creditor must secondly show that the transfer occurred after you had theliability. Once you have a present liability, you cannot safely transfer your assets for less than fair value. No less safe are assets that you transfer when you have a future, foreseeable or
probable liability. But you can safely transfer your assets to protect them against a future
possible liability. How do we differentiate a
probable from a
possible liability? The courts consider the facts of each case. When did the act occur that created the liability? When did the debtor first learn of the liability? When was the transfer? Courts conclude differently on whether a liability was
A 'present liability' exists from the moment you have a creditor (incurred a liability). Later asset transfers can be challenged. For example, if you sign a lease today and gift your assets tomorrow, your landlord can recover your gifted assets if you later default on your lease. You didn't have to be in default on your lease for your transfer to be fraudulent. It's also immaterial whether you were yet sued. The critical date is when did the liability arise – not the date of default or when the lawsuit was filed.