The fraudulent transfer laws are truly ancient. According to later writings by the great Roman jurisconsultats [spelling correct], there were provisions for fraudulent transfers in the Twelve Tables, that first written Roman law completed circa. 450 B.C., but we'll never know what since no copies have been found. The point is that fraudulent transfer law has been around for nearly 2,500 years, created by the Romans, tinkered with by the Franks and others, and expanded by the English. The most important provisions have survived largely unchanged into modern times.
Prior to the Nineteenth Century, American law generally was largely an amalgamation of English common law with a healthy salting of European civil law. English law on the subject was first codified in the Fraudulent Conveyances Act of 1571, often referred to as the Statute of 13 Elizabeth, Ch. 5. That Act reflects fraudulent transfer law at that time as being largely criminal, i.e., a fraudulent transfer was an action taken not just in derogation of the rights of creditors, but against the Crown itself. When a creditor recovered for a fraudulent conveyance, half of the recovery went to the creditor and half of the recovery went to the Crown. Thus, in the first landmark case in English fraudulent transfer jurisprudence, being Twyne's Case decided in 1601, the fraudulent transferee, Twyne, ends up being tried by the Star Chamber and subsequently imprisoned. Even today, in a number of states, such as California, the making, receipt, or assistance with a fraudulent transfer is still a statutory crime.
The core concepts of the Fraudulent Conveyances Act of 1571, and the English law opinions, including that in Twyne's case, ultimately served as the primary source of American law on the subject as adopted by the colonies and then by the states. This now brings us to 1914, when the Uniform Law Commission (ULC) began drafting a uniform act (indeed, one of the first uniform acts), which ultimately resulted in the Uniform Fraudulent Conveyances Act of 1918 (UFCA), which was widely adopted, and even persisted in New York through the date of this writing in 2014.
Over time, however, the UFCA was shown to have certain serious flaws, probably the most notorious being that it required that a creditor show that the transferee lacked "good faith" in making the transfer, which placed a very difficult evidentiary burden on creditors who were often not in a position to know all the facts. Another flaw was that "conveyance" is a term that is largely peculiar to the laws of real property, and so some courts from time to time would incorrectly deny relief to a creditor who was attempting to avoid a transfer of personal property.
The next significant change in fraudulent transfer law came not in the uniform acts, but in the Bankruptcy Code of 1978, with its bright, shiny, new §§ 548 and 550 which provided bankruptcy law with modern fraudulent transfer provisions. This lead to, just a few years later, to the Uniform Fraudulent Transfers Act of 1984 (UFTA), which made "good faith" an affirmative defense that the transferee would be required to prove up, and also booted the unfortunate word "conveyance".
But the UFTA did not mirror Bankruptcy Code §§ 548 and 550, nor should it. Bankruptcy law is primarily concerned with preferences, i.e., transfers by the debtor shortly before filing for bankruptcy, and the bankruptcy fraudulent transfer provisions are simply a luxury extra like leather bucket seats. By contrast, the state fraudulent transfer laws are meant to cast a much wider net to protect the rights of creditors. Thus, §§ 548 and 550 are relatively limited in their scope, and § 548 has an impractically short two-year limitations period -- so short that Bankruptcy Trustees rarely use § 548, but instead commonly opt to use state fraudulent transfers with their longer four-year limitations periods to set aside transfers.
The ULC's adoption of the UFTA in 1984 was widely adopted by nearly all the states. In 2012, the ULC constituted a Drafting Committee to revise the UFTA, and that lead to the adoption of the 2014 Revisions to the UFTA, now called the Uniform Voidable Transactions Act (UVTA) in 2014. Despite the change of name, the UVTA is actually just a slight revision of the UFTA, much more rounding off the rough edges and filling in gaps than making anything like dramatic substantive changes, i.e., it is not really anything like a "new" Act, but much more like UFTA 2.0. Yet, the UVTA is definitely shows improvement over the 1984 legislation in new rules that govern burdens of proof and conflicts of law.
There are no less than four major bodies of fraudulent transfer law in the United States, being:
- The UVTA a/k/a 2014 Revisions to the UFTA;
- Bankruptcy Code §§ 544, 548 and 550, which of course is available only in a bankruptcy proceeding;
- Fraudulent Transfers for U.S. Claims, which is available only to the U.S. as a party; and
- Common-law fraudulent transfer, which has survived in many if not most states.
The purpose of this website is to explore and elucidate upon fraudulent transfer law. As a litigator who, at the time of this writing, has dealt with fraudulent transfer law for over 30 years, both on the creditor and debtor sides more-of-less evenly, I have written commentary and attempted to re-organize the treatment of this body of law in a way that is friendly to, well, litigators. When possibly, I have also tried to include material to explain why various provisions exist and what they were meant to do. Understanding the why will almost invariably lead to a much better understanding of how the law operates as it does.
This website also focuses mostly on garden-variety fraudulent transfers. The net of the fraudulent transfer laws is cast broadly, and picks up transfers as diverse as the reorganization of a financially-distressed mega-conglomerate, as well as the creditor who is simply trying to get the debtor's former Bentley back from his wife's cousin who bought it for $1 two weeks before trial. It is the latter type of transactions that is the focus of this website; probably those who deal with the former type of transactions will feel that the treatment of this website is too pedestrian, but truthfully those litigators likely know this body of law as it relates to those special types of cases far better than your writer ever will, and so they will be left to their own study. This website is aimed at getting the Bentley back.
Notably, the law of fraudulent transfers changes not just with the Uniform Laws and the Bankruptcy Code, but with the numerous court opinions which come out daily on the subject, and so this website should be viewed as no more than the starting point in the analysis of a fraudulent transfer issue, and nothing like its conclusion. When possible, I try to keep up with the most important new opinions dealing with fraudulent transfer issues, and this commentary is included in the resources section of this website.
I hope that you find it useful. Comments and suggestions to me at jay [at] jay.com are always welcome.
RECENT ARTICLES
2020.06.30 ... Attorney Fees Held Awardable Under Nevada Fraudulent Transfer Law In Morgan Stanley Opinion
2020.06.11 ... Bank That Was Financially Involved With Debtor Gets Caught Up In Fraudulent Transfer Case In Wilson
2020.05.21 ... Utah Supreme Court Rejects Mixed Motive Test For Intentional Fraudulent Transfers In Jones Case
2020.01.06 ... Twyne’s Case And The Most Infamous Flock Of Sheep In Anglo-American Law
2019.12.07 ... New York Finally Modernizes Its Fraudulent Transfer Laws By Adopting The Uniform Voidable Transactions Act
2019.10.29 ... Repeal Of Kentucky’s Fraudulent Transfer Law In Favor Of UVTA Causes Headaches In Orchard
2019.10.19 ... Texas Homestead Gets Constitutional Protection From Fraudulent Transfer Claim In Lapides
Many more articles on voidable transactions law found here
UVTA - LOGICAL ORGANIZATION
(Designed For Litigators)
Click here to go to the Voidable Transactions Decision Chart
Overview of UVTA -- The process and result
Learn The Vocabulary Of The Act (Main Page)
- Who are the parties? (Main Page)
- Creditor - Debtor - Insider & Affiliate - Relative - Organization & Person
- What is a Claim and Debt? - Establishes when the claim arose, and the amount of the claim
- What is an Asset and Property? - Not all property are assets because certain categories of property are excluded
- What is a Lien and a Valid Lien? - Liens also determine the value of assets
- What is a Transfer and when has it occurred? - Not all movement of property are transfers
- What is Value? - Value may have very different meanings to creditors and debtors
- What does Insolvency mean? - Sometimes very difficult to determine
Has A Voidable Transaction Occurred? (Main Page)
- Insolvency Test - The best test for creditors to use when available
- Insider Preference Test - Not really a voidable transaction test, but instead a preferential transfer test
- Overextending Insolvency Test - The debtor engaged in a transaction for which it did not have the necessary financial strength
- Sinking Insolvency Test - The debtor knew or should have known that insolvency was near
- Intent Test - The debtor intended to hinder, delay or defraud any creditor
- Badges of Fraud - One of the most misunderstood subjects and frequently misapplied
Does The Transferee Have A Defense? (Main Page)
- Extinguishment Periods a/k/a (incorrectly) Statute of Limitations - When UVTA actions cease to be viable
- Transferee's Good Faith - How a transferee can avoid liability
What Remedies Are Available? (Main Page)
- Non-Money Remedy (Avoidance, Injunction, Attachment, Levy, Receiver, Other) - The most common remedies which restore title to the asset in the debtor for purposes of the creditor's enforcement
- Money Judgment - When the remedy of avoidance is unattractive
Other Helpful Provisions (Main Page)
- Burdens of Proof - Who proves what and when
- Conflicts-Of-Laws - When multiple jurisdictions' laws may apply and they differ
- Applicability to Protected Series Organizations (Series LLCs) - Intra-series transfers may be voidable transactions
- Uniformity Between States - When the courts of one jurisdiction should look at UVTA rulings in another
- Supplementary Law - Resolving issues that are not covered by the UVTA
- Electronic Signatures - An utter waste of statutory drafting
- Title of the Act - Dumping fraudulent transfer for voidable transaction
- Conforming Amendments - Information for enacting legislatures
UVTA - NUMERICAL ORGANIZATION
(Confusing & Difficult To Use)
The Uniform Law Commission's complete copy of the UVTA with comments in PDF format is available here. The webpage for the UVTA, showing states that have enacted and much other information regarding the Act is found here.
1 - Definitions
(1) Affiliate -- (2) Asset -- (3) Claim -- (4) Creditor -- (5) Debt -- (6) Debtor -- (7) Electronic -- (8) Insider -- (9) Lien -- (10) Organization -- (11) Person -- (12) Property -- (13) Record -- (14) Relative -- (15) Sign -- (16) Transfer -- (17) Valid Lien
2 - Insolvency - How insolvency is calculated
3 - Value - Issues relating to calculating value
4 - Transfer Or Obligation Voidable As To Present Or Future Creditor
(a)(1) {Intent Test} - To hinder, delay or defraud any creditor
(a)(2)(i) {Overextending Insolvency Test} - The debtor engages in a transaction for which it does not have the financial strength
(a)(2)(ii) {Sinking Insolvency Test} - The debtor is not technically insolvent but headed for insolvency
(b) {Badges of Fraud} - Circumstances available to prove the debtor's intent
5 - Transfer or Obligation Voidable As To Present Creditor
(a) {Insolvency Test} - The test preferred by creditors
(b) {Insider Preference Test} - Not really a fraudulent transfer test at all
6 - When Transfer Is Made Or Obligation Is Incurred - Determines the time of the transfer
7 - Remedies Of Creditor
{Non-Money Judgment Remedies} - Avoidance, attachment, etc.
8 - Defenses, Liability, And Protection Of Transferee Or Obligee
{Main Provisions} -The transferee's good faith for-value defense
(b) and (c) {Money Judgment Remedy} - Alternative remedy for creditors when avoidance is not good enough
9 - Extinguishment Of Claim For Relief - Similar to Statutes of Limitation
10 - Governing Law - Conflicts of Laws provisions
11 - Application To Series Organization - Applies to intra-series transfers
12 - Supplementary Provisions - Allows application of other law to issues unresolved by the UVTA
13 - Uniformity Of Application And Construction - Court opinions from other states may be looked to for guidance
14 - Relation To Electronic Signatures In Global And National Commerce - Waste of statutory space
15 - Short Title - From fraudulent transfers to voidable transactions
16 - Repeals; Conforming Amendment - Information for enacting legislatures
OTHER SOURCES OF
FRAUDULENT TRANSFER LAW
Fraudulent Transfers In Bankruptcy - Main Page
- Bankruptcy Code Section 544 - Trustee as lien creditor and as successor to certain creditors and purchasers
- Bankruptcy Code Section 548 -- Fraudulent Transfers And Obligations
- Bankruptcy Code Section 550 -- Liability of Transferee of Fraudulent Transfer
28 U.S.C. § 3301, et seq. - Where United States is the creditor
Common Law Fraudulent Transfer - Still exists in most states
Fraudulent Conveyances Act of 1571 a/k/a Statute of 13 Elizabeth - The medieval statute to which the modern American UVTA traces some of its roots.
Statutes Of The U.S. Jurisdictions -- State and Territorial Voidable Transaction and Fraudulent Transfer Laws
TOPICAL COURT OPINIONS
DEFINITIONS
Creditor Definition - Court opinions on the definition of creditor
Debtor Insider Affiliate Relative Organization Person Definitions - Court opinions on the definitions of debtor, insider, etc.
Claim And Debt Definitions - Court opinions on the definitions of claim and debt
Asset And Property Definitions - Court opinions on the definitions of assets and property
Lien And Valid Lien Definitions - Court opinions on the definitions of lien and valid lien
Transfer Definition - Court opinions on the definition of transfer
Value And Reasonably Equivalent Value (REV) Definition - Court opinions on the definitions of value and reasonably equivalent value
Insolvency Definition - Court opinions on the definition of insolvency
TESTS
Insolvency Test - Court opinions relating to the Insolvency Test
Insider Preference Test - Court opinions relating to the Insider Preference Test
Overextending Insolvency Test - Court opinions relating to the Overextending Insolvency Test
Sinking Insolvency Test - Court opinions relating to the Sinking Insolvency Test
Intent Test - Court opinions relating to the Intent Test
Badges Of Fraud - Court opinions relating to the Badges of Fraud
DEFENSES
Extinguishment Periods a/k/a (incorrectly) Statute Of Limitations - Court opinions relating to the extinguishment periods
Transferee Good Faith - Court opinions relating to the transferee good faith for-value defense
REMEDIES
Non-Money Remedies - Court opinions relating to avoidance and other non-money remedies
Money Judgment Remedies - Court opinions relating to money judgments
Attorney Fees -- Court opinions relating to awards of attorney fees
OTHER
Burdens of Proof - Court opinions relating to the burdens of proof
Conflict Of Laws - Court opinions relating to conflict of laws
Uniformity - Court opinions relating to uniformity with the laws of other jurisdictions
Supplementary Law - Court opinions relating to the interplay of the UVTA with other law
Jurisdictional Issues - Court opinions relating to jurisdiction of UVTA actions.
BANKRUPTCY
Section 548 - Court opinions relating to 11 USC 548
OTHER RESOURCES
- Decision Chart - How to resolve UVTA cases
- Topical Court Opinions - Collection of interesting court opinions
- Useful Articles and References - Other articles of interest
- Jay Adkisson's Available Services - Stuff I do
OTHER INFORMATIONAL WEBSITES
by Jay Adkisson
- Jay Adkisson - More about Jay D. Adkisson, background, books, articles, speaking appearances.
- Captive Insurance - Licensed insurance companies formed by the parent organization to handle the insurance and risk management needs of the business, by the author of the best-selling book on the topic: Adkisson's Captive Insurance Companies.
- Asset Protection - The all-time best-selling book on asset protection planning by Jay Adkisson and Chris Riser.
- Creditor-Debtor - An explanation of common creditor remedies, strategies and tactics to enforce a judgment, including a discussion of common debtor asset protection strategies.
- Private Retirement Plans - An exploration of a unique creditor exemption allowed under California law which can be very beneficial but is often misused.
- Charging Orders - The confusing remedy against a debtor's interest in an LLC or partnership is explained in reference to the Uniform Partnership Act, the Uniform Limited Partnership Act, and the Uniform Limited Liability Company Act.
- Protected Series - An examination of the single most complex statutory legal structure yet created, with particular reference to the Uniform Protected Series Act of 2017.
- California Enforcement of Judgments Law - Considers the topic of judgment enforcement in California, including the California Enforcement of Judgments Law and other laws related to California creditor-debtor issues.
- Anti-SLAPP Laws - A collection of and commentary about Anti-SLAPP laws and significant court decisions on the subject within the United States, and special section on California Anti-SLAPP.
Voidable Transactions:
Fraudulent Transfers In American Law
by Jay D. Adkisson (Available 2021)
Contact Jay Adkisson:
Phone: 702-953-9617 Fax: 877-698-0678 jay [at] jayad.com
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© 2020 Jay D. Adkisson. All rights reserved. No claim to government works or the works of the Uniform Law Commission. The information contained in this website is for general educational purposes only, does not constitute any legal advice or opinion, and should not be relied upon in relation to particular cases. Use this information at your own peril; it is no substitute for the legal advice or opinion of an attorney licensed to practice law in the appropriate jurisdiction. This site https://voidabletransactions.com Contact: jay [at] jayad.com or by phone to 702-953-9617 or by fax to 877-698-0678.