His personal financial statement put the value of the assets he held at around $50 million, including a 50% stake in the Laurens County property valued at $1.57 million. He took out three loans from First Citizens Bank to finance three separate investments, totaling an initial loan amount of $3.873 million, and renewed them several times.Īround the time that the housing bubble burst, Clifton requested extensions on the loans, which the bank granted after he provided a personal financial statement demonstrating his ability to pay them back. He purchased one property with Linda Whiteman in 1995, a piece of land in Laurens County, SC of approximately 370 acres, which they said was for retirement.Ĭlifton also regularly borrowed money to finance his purchases. Kenneth Clifton was a successful real estate developer who frequently bought land as investment properties and transferred them to LLCs. Kenneth Clifton borrowed $3.873 million from First Citizens Bank The South Carolina Court of Appeals heard a case on this very subject and decided in the case in February. A recent South Carolina case on the Statute of Elizabeth If the court does find that the conveyance was fraudulent, it can be “undone,” giving the creditor recourse for collecting on its debt. The court will look for a number of badges of fraud one alone does not create a presumption of fraud. Retention by the debtor of possession of the property.Reservation of benefit to the transferor.Departure from usual method of business.Pending litigation or threat of litigation.A relationship between the transferor and transferee.A lack of consideration for the conveyance.Insolvency or indebtedness of transferor.How does the court know whether the transfer was, indeed, done fraudulently? If the transferor denies fraud (as you’d expect), the court can look for these “badges of fraud”: According to South Carolina Code, “every gift, grant alienation, bargain, transfer, and conveyance of lands… for any intent or purpose to delay, hinder, or defraud creditors and others of their just and lawful actions, suits, debts, accounts, damages, penalties, and forfeitures must be deemed and taken… to be clearly and utterly void…” The purpose of the Statute of Elizabeth is to provide a way for creditors to “undo” asset transfers of their debtors when the transfers were done so fraudulently. Most states have since adopted the Uniform Fraudulent Conveyances Act (UFCA) or, more commonly, the Uniform Fraudulent Transfer Act (UFTA). The Fraudulent Conveyances Act, as it’s properly known, was an English act of 16th Century Parliament that many U.S. Moving assets in the way described above is referred to as “fraudulent conveyance,” after the Fraudulent Conveyances Act of 1571, aka the Statute of 13 Elizabeth. What if you owed someone a lot of money, but you didn’t want to pay them back? You might try to put your assets somewhere they couldn’t be touched for example, you might gift them to a person you trust, or transfer them to an LLC.įortunately for your creditor, and unfortunately for you, you won’t get away with this scheme if your intention is to avoid paying your debts. The Statute of Elizabeth: What You Need to Know About Transferring Assets
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