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Voidable Transactions

 - previously known as -

Fraudulent Transfers

 

Caution state law variances!

Available 2021

Introduction to the Uniform Voidable Transactions Act

(a/k/a the 2014 Revisions to the Uniform Fraudulent Transfers Act)

 

The fraudulent transfer laws are really old, as in 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, and the most important provisions have survived into modern times.

 

As they became civilized, the Germanic tribes adopted the Roman Civil Law, and it was largely through the Franks that the English also liberally adopted that body of law, including fraudulent transfer law. English law on the subject was 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. Thus, in perhaps 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 an optional extra. 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 thus four bodies of fraudulent transfer law in the U.S., being:

  1. The UVTA a/k/a 2014 Revisions to the UFTA (and the UFCA in a couple of holdout states); and
  2. Bankruptcy Code §§ 544, 548 and 550, which of course is available only in a bankruptcy proceeding
  3. Fraudulent Transfers for U.S. Claims; and
  4. 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 nearly 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. 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] jayadkisson.com are always welcome.

 

 

 

 

UVTA AUDIO PRESENTATION

 

Need to become fluent in the UVTA quickly? This four-hour audio program by Jay Adkisson and Dave Slenn, ABA Advisors to the UVTA Drafting Committee, explains key features of the UVTA, how they operate, and why. Hosted by Leimberg Information Services. Click here for more

RECENT ARTICLES ON FRAUDULENT TRANSFERS

 

2019.09.13 ... The Sackler Family And Fraudulent Transfers

2019.08.21 ... Of Jeffrey Epstein And The Assets He Placed Into Trust Two Days Before His Death

2019.07.27 ... Cortez Rule For California Uniform Voidable Transactions Act Reaffirmed In Potter

2019.07.08 ... Fraudulent Transfers And The Statute of 13 Elizabeth Translated To Contemporary Legal English

2019.05.30 ... Understanding The Elements Of The UVTA Tests For A Voidable Transaction

2019.05.20 ... Good Faith Not Enough For Transferee To Establish Fraudulent Transfer Defense In Hawk

2019.03.31 ... Voidability Of Sham Lawsuit And Judgment At Issue In Chen

2019.02.22 ... California Court Of Appeals Swings And Misses On Pre-Marital Fraudulent Transfer Agreement In Sturm

2019.02.12 ... Why The Mere Incorporation Or Formation Process For A New Entity Is Not A Fraudulent Transfer

2019.01.30 ... Resignation Of Corporate Officer Not A Fraudulent Transfer In Texas Opinion

 

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)

 

Has A Voidable Transaction Occurred? (Main Page)

 

Does The Transferee Have A Defense? (Main Page)

 

What Remedies Are Available? (Main Page)

 

Other Helpful Provisions (Main Page)

 

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

 

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.

 

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

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

BANKRUPTCY

     Section 548  - Court opinions relating to 11 USC 548

 

OTHER RESOURCES

 

 

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.

 

  • Judgment Collection - 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.

 

Available in 2021

 

Voidable Transactions: Fraudulent Transfers In American Law, by Jay D. Adkisson

 

Click here for more information

© 2019 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. Other. This site https://voidabletransactions.com Contact: jay [at] jayad.com or by phone to 702-953-9617 or by fax to 877-698-0678.