JayNote: Section 548 largely sets out the substantive law of fraudulent transfers in bankruptcy, while § 550 sets out the defenses of the transferee and some limitations upon fraudulent transfer actions in bankruptcy.
It is very important to know that in bankruptcy the primary tool for dealing with a debtor's late transfers are the provisions dealing with preferential transfers, in contrast to state law where the primary tool is the UFTA/UVTA and many states do not even have preferential transfer laws. There is an academic question as to whether the U.S. Bankruptcy Code should even have its own fraudulent transfer laws, since state fraudulent transfer laws are almost always used by bankruptcy trustees and creditors anyway. As Prof. Ken Kettering, Reporter for the UVTA, has remarked: "Since the primary weapon in bankruptcy is preferential transfer law, and much better developed state fraudulent transfer law is also available, the bankruptcy code's fraudulent transfer provisions are simply a luxury, akin to leather bucket seats."
(a)
(1) The trustee may avoid any transfer (including any transfer to or for the benefit of an insider under an employment contract) of an interest of the debtor in property, or any obligation (including any obligation to or for the benefit of an insider under an employment contract) incurred by the debtor, that was made or incurred on or within 2 years before the date of the filing of the petition, if the debtor voluntarily or involuntarily—
JayNote: The limitations period for a fraudulent transfer in bankruptcy is only two years, as opposed to a four year extinguishment period under state voidable transactions law, and which is why state voidable transactions law is often used in lieu of § 548. However, if the debtor makes the (very common) mistake of listing a tax debt to the United States, the effective limitations period may be as long as ten years, per In re Kipnis, 2016 WL 4543772 (Bk.S.D.Fla., 2016).
(A) made such transfer or incurred such obligation with actual intent to hinder, delay, or defraud any entity to which the debtor was or became, on or after the date that such transfer was made or such obligation was incurred, indebted; or
JayNote: Section 548(a)(1)(A) corresponds to the Intent Test found at UVTA § 4(a)(1).
(B)
(i) received less than a reasonably equivalent value in exchange for such transfer or obligation; and
(ii)
(I) was insolvent on the date that such transfer was made or such obligation was incurred, or became insolvent as a result of such transfer or obligation;
JayNote: Section 548(a)(1)(B)(ii)(I) corresponds to the Insolvency Test found at UVTA § 5(a).
(II) was engaged in business or a transaction, or was about to engage in business or a transaction, for which any property remaining with the debtor was an unreasonably small capital;
JayNote: Section 548(a)(1)(B)(ii)(II) corresponds to the Overextending Insolvency Test found at UVTA § 4(a)(2)(i).
(III) intended to incur, or believed that the debtor would incur, debts that would be beyond the debtor’s ability to pay as such debts matured; or
JayNote: Section 548(a)(1)(B)(ii)(III) corresponds to the Sinking Insolvency Test found at UVTA § 4(a)(2)(ii).
(IV) made such transfer to or for the benefit of an insider, or incurred such obligation to or for the benefit of an insider, under an employment contract and not in the ordinary course of business.
JayNote: Section 548(a)(1)(B)(ii)(IV) has no analog in the UVTA but is unique to bankruptcy.
(2) A transfer of a charitable contribution to a qualified religious or charitable entity or organization shall not be considered to be a transfer covered under paragraph (1)(B) in any case in which—
(A) the amount of that contribution does not exceed 15 percent of the gross annual income of the debtor for the year in which the transfer of the contribution is made; or
(B) the contribution made by a debtor exceeded the percentage amount of gross annual income specified in subparagraph (A), if the transfer was consistent with the practices of the debtor in making charitable contributions.
JayNote: Section 548(a)(2) has no analog in the UVTA, although some states (such as Minnesota) have adopted analogous provisions. This subsection is essentially meant to allow a debtor's routine tithing to be protected from avoidance as a fraudulent transfer.
(b) The trustee of a partnership debtor may avoid any transfer of an interest of the debtor in property, or any obligation incurred by the debtor, that was made or incurred on or within 2 years before the date of the filing of the petition, to a general partner in the debtor, if the debtor was insolvent on the date such transfer was made or such obligation was incurred, or became insolvent as a result of such transfer or obligation.
JayNote: Section 548(b) has no analog in the UVTA, and essentially gives the bankruptcy trustee the power to "clawback" distributions and other transfers made to a general partner (but not a limited partner) within two-years of the filing of the bankruptcy petition.
(c) Except to the extent that a transfer or obligation voidable under this section is voidable under section 544, 545, or 547 of this title, a transferee or obligee of such a transfer or obligation that takes for value and in good faith has a lien on or may retain any interest transferred or may enforce any obligation incurred, as the case may be, to the extent that such transferee or obligee gave value to the debtor in exchange for such transfer or obligation.
JayNote: Section 548(c) is generally analogous to the so-called Good Faith For Value Defense of UVTA § 8(a) and (d).
(d)
(1) For the purposes of this section, a transfer is made when such transfer is so perfected that a bona fide purchaser from the debtor against whom applicable law permits such transfer to be perfected cannot acquire an interest in the property transferred that is superior to the interest in such property of the transferee, but if such transfer is not so perfected before the commencement of the case, such transfer is made immediately before the date of the filing of the petition.
JayNote: Section 548(d) is roughly analogous to UVTA § 6.
(2) In this section—
(A) “value” means property, or satisfaction or securing of a present or antecedent debt of the debtor, but does not include an unperformed promise to furnish support to the debtor or to a relative of the debtor;
(B) a commodity broker, forward contract merchant, stockbroker, financial institution, financial participant, or securities clearing agency that receives a margin payment, as defined in section 101, 741, or 761 of this title, or settlement payment, as defined in section 101 or 741 of this title, takes for value to the extent of such payment;
(C) a repo participant or financial participant that receives a margin payment, as defined in section 741 or 761 of this title, or settlement payment, as defined in section 741 of this title, in connection with a repurchase agreement, takes for value to the extent of such payment;
(D) a swap participant or financial participant that receives a transfer in connection with a swap agreement takes for value to the extent of such transfer; and
(E) a master netting agreement participant that receives a transfer in connection with a master netting agreement or any individual contract covered thereby takes for value to the extent of such transfer, except that, with respect to a transfer under any individual contract covered thereby, to the extent that such master netting agreement participant otherwise did not take (or is otherwise not deemed to have taken) such transfer for value.
(3) In this section, the term “charitable contribution” means a charitable contribution, as that term is defined in section 170(c) of the Internal Revenue Code of 1986, if that contribution—
(A) is made by a natural person; and
(B) consists of—
(i) a financial instrument (as that term is defined in section 731(c)(2)(C) of the Internal Revenue Code of 1986); or
(ii) cash.
(4) In this section, the term “qualified religious or charitable entity or organization” means—
(A) an entity described in section 170(c)(1) of the Internal Revenue Code of 1986; or
(B) an entity or organization described in section 170(c)(2) of the Internal Revenue Code of 1986.
JayNote: Except for the definition of "value", § 548(d)(2) has no analog in the UVTA.
(e)
(1) In addition to any transfer that the trustee may otherwise avoid, the trustee may avoid any transfer of an interest of the debtor in property that was made on or within 10 years before the date of the filing of the petition, if—
(A) such transfer was made to a self-settled trust or similar device;
(B) such transfer was by the debtor;
(C) the debtor is a beneficiary of such trust or similar device; and
(D) the debtor made such transfer with actual intent to hinder, delay, or defraud any entity to which the debtor was or became, on or after the date that such transfer was made, indebted.
(2) For the purposes of this subsection, a transfer includes a transfer made in anticipation of any money judgment, settlement, civil penalty, equitable order, or criminal fine incurred by, or which the debtor believed would be incurred by—
(A) any violation of the securities laws (as defined in section 3(a)(47) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(47))), any State securities laws, or any regulation or order issued under Federal securities laws or State securities laws; or
(B) fraud, deceit, or manipulation in a fiduciary capacity or in connection with the purchase or sale of any security registered under section 12 or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78l and 78o(d)) or under section 6 of the Securities Act of 1933 (15 U.S.C. 77f).
JayNote: Section 548(e) has no analog in the UVTA, and the case of a debtor utilizing an irrevocable self-settled trust (a/k/a "asset protection trust") is one of the very few occasions where the federal bankruptcy law of fraudulent transfers is preferable to the state UVTA.
BANKRUPTCY FRAUDULENT TRANSFER OPINIONS
Exempt Property Transfers
In re Vorhes, 2018 WL 1577980 (N.D.Iowa, March 29, 2018).
Self-Settled Trust or Similar Device
In re Cyr (Rodriquez v. Cyr), 2019 WL 1495137 (W.D.Tex., April 1, 2019).
Statute of Limitations
In re Kipnis, 2016 WL 4543772 (Bk.S.D.Fla., 2016).
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.