New Jersey Voidable Transaction UVTA Fraudulent Transfer UFTA

 

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VOIDABLE TRANSACTIONS & FRAUDULENT TRANSFERS

 

NEW JERSEY UNIFORM FRAUDULENT TRANSFERS ACT

 

New Jersey Uniform Fraudulent Transfers Act

New Jersey UFTA a/k/a NJUFTA or NUFTA

N.J.S. 25:2-20, et seq.

 

{ Check Currency - Current Only As Of January 1, 2020 }

 

25:2-20. Short title; Uniform Fraudulent Transfer Act

 

This article shall be known and may be cited as the “Uniform Fraudulent Transfer Act.”

 

25:2-21. Definitions: A to H

 

As used in this article:

 

“Affiliate” means:

 

a. A person who directly or indirectly owns, controls, or holds with power to vote, 20% or more of the outstanding voting securities of the debtor, other than a person who holds the securities,

 

(1) As a fiduciary or agent without sole discretionary power to vote the securities; or

 

(2) Solely to secure a debt, if the person has not exercised the power to vote;

 

b. A corporation 20% or more of whose outstanding voting securities are directly or indirectly owned, controlled, or held with power to vote, by the debtor or a person who directly or indirectly owns, controls, or holds with power to vote, 20% or more of the outstanding voting securities of the debtor, other than a person who holds the securities,

 

(1) As a fiduciary or agent without sole power to vote the securities; or

 

(2) Solely to secure a debt, if the person has not in fact exercised the power to vote;

 

c. A person whose business is operated by the debtor under a lease or other agreement, or a person substantially all of whose assets are controlled by the debtor; or

 

d. A person who operates the debtor’s business under a lease or other agreement or controls substantially all of the debtor’s assets.

 

“Asset” means property of a debtor, but the term does not include:

 

a. Property to the extent it is encumbered by a valid lien;

 

b. Property to the extent it is generally exempt under nonbankruptcy law; or

 

c. An interest in property held in tenancy by the entireties to the extent it is not subject to process by a creditor holding a claim against only one tenant.

 

“Claim” means a right to payment, whether or not the right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured.

 

“Creditor” means a person who has a claim.

 

“Debt” means liability on a claim.

 

“Debtor” means a person who is liable on a claim.

 

25:2-22. Definitions: I to Z

 

As used in this article:

 

“Insider” includes:

 

a. If the debtor is an individual,

 

(1) A relative of the debtor or of a general partner of the debtor;

 

(2) A partnership in which the debtor is a general partner;

 

(3) A general partner in a partnership described in paragraph (2) of subsection a. of this definition; or

 

(4) A corporation of which the debtor is a director, officer, or person in control;

 

b. If the debtor is a corporation,

 

(1) A director of the debtor;

 

(2) An officer of the debtor;

 

(3) A person in control of the debtor;

 

(4) A partnership in which the debtor is a general partner;

 

(5) A general partner in a partnership described in paragraph (4) of subsection b. of this definition; or

 

(6) A relative of a general partner, director, officer, or person in control of the debtor;

 

c. If the debtor is a partnership,

 

(1) A general partner in the debtor;

 

(2) A relative of a general partner in, or a general partner of, or a person in control of the debtor;

 

(3) Another partnership in which the debtor is a general partner;

 

(4) A general partner in a partnership described in paragraph (3) of subsection c. of this definition; or

 

(5) A person in control of the debtor;

 

d. An affiliate, or an insider of an affiliate as if the affiliate were the debtor; and

 

e. A managing agent of the debtor.

 

“Lien” means a charge against or an interest in property to secure payment of a debt or performance of an obligation, and includes a security interest created by agreement, a judicial lien obtained by legal or equitable process or proceedings, a common-law lien, or a statutory lien.

 

“Person” means an individual, partnership, corporation, association, organization, government or governmental subdivision or agency, business trust, estate, trust, or any other legal or commercial entity.

 

“Property” means anything that may be the subject of ownership.

 

“Relative” means an individual related by consanguinity within the third degree as determined by the common law, a spouse, or an individual related to a spouse within the third degree as so determined, and includes an individual in an adoptive relationship within the third degree.

 

“Transfer” means every mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing of or parting with an asset or an interest in an asset, and includes payment of money, release, lease, and creation of a lien or other encumbrance.

 

“Valid lien” means a lien that is effective against the holder of a judicial lien subsequently obtained by legal or equitable process or proceedings.

 

25:2-23. Insolvency

 

a. A debtor is insolvent if the sum of the debtor’s debts is greater than all of the debtor’s assets, at a fair valuation.

 

b. A debtor who is generally not paying his debts as they become due is presumed to be insolvent.

 

c. A partnership is insolvent under subsection a. of this section if the sum of the partnership’s debts is greater than the aggregate, at a fair valuation, of all of the partnership’s assets and the sum of the excess of the value of each general partner’s nonpartnership assets over the partner’s nonpartnership debts.

 

d. Assets under this section do not include property that has been transferred, concealed, or removed with intent to hinder, delay, or defraud creditors or that has been transferred in a manner making the transfer voidable under this article.

 

e. Debts under this section do not include an obligation to the extent it is secured by a valid lien on property of the debtor not included as an asset.

 

25:2-24. Value

 

a. Value is given for a transfer or an obligation if, in exchange for the transfer or obligation, property is transferred or an antecedent debt is secured or satisfied, but value does not include an unperformed promise made otherwise than in the ordinary course of the promisor’s business to furnish support to the debtor or another person.

 

b. For the purposes of subsection b. of R.S. 25:2-25 and R.S. 25:2-27, a person gives a reasonably equivalent value if the person acquires an interest of the debtor in an asset pursuant to a regularly conducted, noncollusive foreclosure sale or execution of a power of sale for the acquisition or disposition of the interest of the debtor upon default under a mortgage, deed of trust, or security agreement.

 

c. A transfer is made for present value if the exchange between the debtor and the transferee is intended by them to be contemporaneous and is in fact substantially contemporaneous.

 

25:2-25. Transfers fraudulent as to present and future creditors

 

A transfer made or obligation incurred by a debtor is fraudulent as to a creditor, whether the creditor’s claim arose before or after the transfer was made or the obligation was incurred, if the debtor made the transfer or incurred the obligation:

 

a. With actual intent to hinder, delay, or defraud any creditor of the debtor; or

 

b. Without receiving a reasonably equivalent value in exchange for the transfer or obligation, and the debtor:

 

(1) Was engaged or was about to engage in a business or a transaction for which the remaining assets of the debtor were unreasonably small in relation to the business or transaction; or

 

(2) Intended to incur, or believed or reasonably should have believed that the debtor would incur, debts beyond the debtor’s ability to pay as they become due.

 

25:2-26. Factors in determining fraudulent intent

 

In determining actual intent under subsection a. of R.S. 25:2-25 consideration may be given, among other factors, to whether:

 

a. The transfer or obligation was to an insider;

 

b. The debtor retained possession or control of the property transferred after the transfer;

 

c. The transfer or obligation was disclosed or concealed;

 

d. Before the transfer was made or obligation was incurred, the debtor had been sued or threatened with suit;

 

e. The transfer was of substantially all the debtor’s assets;

 

f. The debtor absconded;

 

g. The debtor removed or concealed assets;

 

h. The value of the consideration received by the debtor was reasonably equivalent to the value of the asset transferred or the amount of the obligation incurred;

 

i. The debtor was insolvent or became insolvent shortly after the transfer was made or the obligation was incurred;

 

j. The transfer occurred shortly before or shortly after a substantial debt was incurred; and

 

k. The debtor transferred the essential assets of the business to a lienor who transferred the assets to an insider of the debtor.

 

25:2-27. Transfers fraudulent as to present creditors

 

a. A transfer made or obligation incurred by a debtor is fraudulent as to a creditor whose claim arose before the transfer was made or the obligation was incurred if the debtor made the transfer or incurred the obligation without receiving a reasonably equivalent value in exchange for the transfer or obligation and the debtor was insolvent at that time or the debtor became insolvent as a result of the transfer or obligation.

 

b. A transfer made by a debtor is fraudulent as to a creditor whose claim arose before the transfer was made if the transfer was made to an insider for an antecedent debt, the debtor was insolvent at that time, and the insider had reasonable cause to believe that the debtor was insolvent.

 

25:2-28. When transfer is made or obligation incurred

 

For the purposes of this article:

 

a. A transfer is made:

 

(1) With respect to an asset that is real property other than a fixture, but including the interest of a seller or purchaser under a contract for the sale of the asset, when the transfer is so far perfected that a good-faith purchaser of the asset from the debtor against whom applicable law permits the transfer to be perfected cannot acquire an interest in the asset that is superior to the interest of the transferee; and

 

(2) With respect to an asset that is not real property or that is a fixture, when the transfer is so far perfected that a creditor on a simple contract cannot acquire a judicial lien otherwise than under this article that is superior to the interest of the transferee;

 

b. If applicable law permits the transfer to be perfected as provided in subsection a. of this section and the transfer is not so perfected before the commencement of an action for relief under this article, the transfer is deemed made immediately before the commencement of the action;

 

c. If applicable law does not permit the transfer to be perfected as provided in subsection a. of this section, the transfer is made when it becomes effective between the debtor and the transferee;

 

d. A transfer is not made until the debtor has acquired rights in the asset transferred;

 

e. An obligation is incurred:

 

(1) If oral, when it becomes effective between the parties; or

 

(2) If evidenced by a writing, when the writing executed by the obligor is delivered to or for the benefit of the obligee.

 

25:2-29. Remedies of creditors

 

a. In an action for relief against a transfer or obligation under this article, a creditor, subject to the limitations in R.S. 25:2-30, may obtain:

 

(1) Avoidance of the transfer or obligation to the extent necessary to satisfy the creditor’s claim;

 

(2) An attachment or other provisional remedy against the asset transferred or other property of the transferee in accordance with the procedure prescribed by Chapter 26 of Title 2A of the New Jersey Statutes and by Rule 4:60 et seq. of the Rules Governing the Courts of the State of New Jersey;

 

(3) Subject to applicable principles of equity and in accordance with applicable rules of civil procedure,

 

(a) An injunction against further disposition by the debtor or transferee, or both, of the asset transferred or of other property;

 

(b) Appointment of a receiver to take charge of the asset transferred or of other property of the transferee; or

 

(c) Any other relief the circumstances may require.

 

b. If a creditor has obtained a judgment on a claim against the debtor, the creditor, if the court so orders, may levy execution on the asset transferred or its proceeds.

 

25:2-30. Defenses, liability and protection of transferee

 

a. A transfer or obligation is not voidable under subsection a. of R.S. 25:2-25 against a person who took in good faith and for a reasonably equivalent value or against any subsequent transferee or obligee.

 

b. Except as otherwise provided in this section, to the extent a transfer is voidable in an action by a creditor under paragraph (1) of subsection a. of R.S. 25:2-29, the creditor may recover judgment for the value of the asset transferred, as adjusted under subsection c. of this section, or the amount necessary to satisfy the creditor’s claim, whichever is less. The judgment may be entered against:

 

(1) The first transferee of the asset or the person for whose benefit the transfer was made; or

 

(2) Any subsequent transferee other than a good-faith transferee who took for value or from any subsequent transferee.

 

c. If the judgment under subsection b. of this section is based upon the value of the asset transferred, the judgment shall be for an amount equal to the value of the asset at the time of the transfer, subject to adjustment as the equities may require.

 

d. Notwithstanding voidability of a transfer or an obligation under this article, a good-faith transferee or obligee is entitled, to the extent of the value given the debtor for the transfer or obligation, to

 

(1) A lien on or a right to retain any interest in the asset transferred;

 

(2) Enforcement of any obligation incurred; or

 

(3) A reduction in the amount of the liability on the judgment.

 

e. A transfer is not voidable under subsection b. of R.S. 25:2-25 or R.S. 25:2-27 if the transfer results from:

 

(1) Termination of a lease upon default by the debtor when the termination is pursuant to the lease and applicable law; or

 

(2) Enforcement of a security interest in compliance with Article 9 of the Uniform Commercial Code, N.J.S. 12A:9-101 et seq.

 

f. A transfer is not voidable under subsection b. of R.S. 25:2-27:

 

(1) To the extent the insider gave new value to or for the benefit of the debtor after the transfer was made unless the new value was secured by a valid lien;

 

(2) If made in the ordinary course of business or financial affairs of the debtor and the insider; or

 

(3) If made pursuant to a good-faith effort to rehabilitate the debtor and the transfer secured present value given for that purpose as well as an antecedent debt of the debtor.

 

25:2-31. Extinguishment of cause of action

 

A cause of action with respect to a fraudulent transfer or obligation under this article is extinguished unless action is brought:

 

a. Under subsection a. of R.S.25:2-25, within four years after the transfer was made or the obligation was incurred or, if later, within one year after the transfer or obligation was discovered by the claimant;

 

b. Under subsection b. of R.S.25:2-25 or subsection a. of R.S.25:2-27, within four years after the transfer was made or the obligation was incurred; or

 

c. Under subsection b. of R.S.25:2-27, within one year after the transfer was made or the obligation was incurred.

 

25:2-32. Supplementary provisions

 

Unless displaced by the provisions of this article, the principles of law and equity, including the law merchant and the law relating to principal and agent, estoppel, laches, fraud, misrepresentation, duress, coercion, mistake, insolvency, or other validating or invalidating cause, supplement its provisions.

 

25:2-33. Uniformity of application and construction

 

This article shall be applied and construed to effectuate its general purpose to make uniform the law with respect to the subject of this article among states enacting it.

 

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)

 

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

 

Criminal Statutes -- Jurisdictions that criminalize fraudulent transfers

 

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

     Punitive Damages - Court opinions relating to punitive and exemplary damages

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

 

 

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)

 

Click here for more information

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.