The Limitations

• Author: Jeffrey Robert Matsen
• Profession: Founder and managing partner of Matsen Voorhees Mintz LLP
• Pages: 13-17

13

CHAPTER

3

The Limitations

Fraudulent Transfer Law

It is not uncommon for a debtor, in an effort to protect his or her property from creditors, to attempt to

transfer assets for little or no consideration to a relative or close friend with an underlying understanding

that once the creditor’s claims become stale or are eliminated, the transferee friend or relative will give the

assets back to the debtor. Obviously, if there wasn’t some limitation on this type of activity with accom-

panying creditor recourse, many creditors would never be able to enforce their judgments.

In order to address this transfer problem and protect the rights of creditors, the Statute of Elizabeth

was passed in jolly old England back in 1571. The statute was the codification of the then-existing com-

mon law of England; it provided that all conveyances and transfer of property made with the intention

of “delaying, hindering or defrauding creditors” or others would be completely void and of no effect. In

1918, several of the United States—through the National Conference of Commissioners on Uniform State

Laws—issued what has now become The Uniform Fraudulent Conveyance Act (the UFCA). Most states

have now either adopted and retained the UFCA or have adopted the Uniform Fraudulent Transfers Act

(UFTA), issued in 1984. The states of California, Florida, Texas and others have adopted the UFTA. New

York and a few other states have retained the UFCA as law.

Basically, under either the UFCA or the UFTA, a debtor cannot transfer assets if the principal reason

is to prevent present or future creditors from gaining access to these assets. The language of “delaying,

hindering or defrauding creditors” is still relevant. Under the UFTA, fraudulent transfers occur in one or