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Caution state law variances!
Does The Transferee Have A Defense?
If an avoidable transaction is found, then the next question is whether the Transferee has a defense. The UVTA provides for only two defenses:
Assuming the Creditor's action is timely, the Transferee is left with showing that the Transferee was in "good faith" and gave at least something of value to the Debtor in exchange — this latter clause will decide whether a good faith Transferee has a complete defense (if the Transferee gave "reasonably equivalent value" to the Debtor, or a possible partial defense (if the Transferee did not, but did give some lesser value). By inference, if a Transferee is not in good faith, then the Transferee is neither entitled to a full or partial defense, except as provided in §8(e) and (f).
The term "good faith" is not defined by the UVTA, so we must look to decisional law for guidance on its meaning.
Here we find yet another significant mis-organization of the UVTA. The Uniform Fraudulent Conveyances Act of 1918 did not separately provide for a good faith defense. Instead, that the Transferee was in good faith was part and parcel of the definition of "fair consideration" under §3 of the UFCA. When the UFCA became the UFTA in 1984, and the term "fair consideration" was discarded, a new §9(a) and (d) was created to provide for the defense of a Transferee in good faith. This made sense.
What didn't make sense was that in the new §9 of the UFTA, the drafters also included a new §9(b) and (c) which for the first time provided that a creditor could elect a money judgment to be paid by the Transferee instead of mere avoidance. These provisions should logically have been put in the also-new creditor's remedies section, which became §7 of the UFTA, but apparently because they also tested the Transferee's good faith, they were instead installed in §8.
What of the debtor's good faith? Other than being evidence to prove that the debtor did not have an intent to defraud his creditors, which of course is only and exclusively relevant to the Intent Test of § 4(a)(1), that the debtor may have acted in good faith in making the transfer is irrelevant.
C O M M O N P A G E F O O T E R
RECENT ARTICLES ON FRAUDULENT TRANSFERS
2018.04.22 ... State And Federal Fraudulent Transfer Law Diverge Over Exempt Property In Vorhes
2017.12.18 ... Revocation Of A Company's S-Election By Shareholders Not Deemed A Voidable Transaction In Arrowsmith
2017.12.07 ... 'I Only Gave It To My Spouse In Case I Got Sued' Defense Flops Once Again In Soley Case
2017.08.20 ... One Year Discovery Rule For Fraudulent Transfers Tested In PNC Bank Case
2017.05.30 ... The Good Faith Transferee Defined In Nautilus
Many more articles by Jay Adkisson found here
UVTA - LOGICAL ORGANIZATION (Designed For Litigators)
Overview of UVTA -- The process and result
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
3 - Value
4 - Transfer Or Obligation Voidable As To Present Or Future Creditor
5 - Transfer or Obligation Voidable As To Present Creditor
8 - Defenses, Liability, And Protection Of Transferee Or Obligee
10 - Governing Law
15 - Short Title
FRAUDULENT TRANSFERS IN BANKRUPTCY
OTHER INFORMATIONAL WEBSITES BY JAY ADKISSON
© 2018 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] jayadkisson.com or by phone to 949-200-7773 or by fax to 877-698-0678.