Definitions Of Asset And Property
THE UNIQUE LANGUAGE OF THE UVTA
Post-judgment enforcement practice is often as alien to many attorneys as the maritime courts or tribal courts. Judgment enforcement has its own procedures, concepts and vocabulary, that has very little relationship to pre-trial litigation. Just as judgment enforcement is a subset of civil procedure generally, within the judgment enforcement lies its own subset of fraudulent transfer law.
A fraudulent transfer lawsuit is similar in many respects to what is known as a "creditor's suit", i.e., a lawsuit brought by a creditor to compel a third-party to disgorge some asset of the Debtor. The difference is that a creditor's suit seeks the recovery of a debtor's asset that is still titled in the name of the debtor but possessed by the third-party, whereas a fraudulent transfer lawsuit seeks the recovery of a debtor's asset that has been titled into the name of the third-party (regardless of who possesses it). In other words, mere possession of the debtor's asset is remedied by a creditor's suit, but a change of title is remedy by a fraudulent transfer action.
Over the centuries, fraudulent transfer law has developed its own unique terms and concepts, and these are further supplemented by certain terms that are meant to harmonize the fraudulent transfer laws with sections 548 and 550 of the Bankruptcy Code, and to a lesser extent Article IX of the Uniform Commercial Code.
It is important at the outset to understand the vernacular of the UVTA, and why each term is given its peculiar meaning, which sometimes is at odds with the way some terms are ordinarily understood in common parlance. For instance, an "asset" for purposes of the UVTA does not include property that is subject to a statutory creditor exemption, although in ordinary usage such property would certainly be thought of as an asset.
Sections 1, 2, 3 and 6 define the terms that are used in the UVTA. Why the definitions in Sections 2, 3 and 6 were not originally combined into a single definitional Section 1, can be traced in part to the definitions of "insolvency" and "fair consideration" which were, for reasons now known only to the souls of drafters now long deceased, given their own sections 2 and 3 in the Uniform Fraudulent Conveyances Act of 1918. This same error was compounded in 1984 with the adoption of the UFTA, which replaced the definition of "Fair Consideration" (which had proven to be an unsuitable and problematic term) with the definition of "value" in section 3, and then added to the definition of "transfer" in section 6. This mis-organization of course contributes strongly to the difficulty of reading the UVTA in a logical fashion, but the 2012-14 Drafting Committee was constrained by the scope of their authority not to engage in a wholesale redrafting of the Act, presumably to promote the easy enactment of the UVTA by the states. Thus, this blatant mis-organization persists in the UVTA as well.
§ 1 Definitions
(17) Valid Lien
§ 2 - Insolvency
§ 3 - Value
§ 6 - When Transfer Is Made Or Obligation Is Incurred
See also Parties To A Voidable Transaction Lawsuit