The reality is that transfers are often made for significantly less consideration than fair consideration because the transferor intends to frustrate creditors. In our original example, your buyer`s principal, who personally guaranteed the purchase and then transferred ownership for less than reasonable consideration, probably did so to discourage you from collecting debts against him personally. Maybe the son or daughter now “owns” that Rembrandt after paying mom or dad $50 for it. If the court concludes that there is a genuine intent to defraud, it awards the creditor`s fees. NYDCL §276-a. Depending on the amount of work the creditor`s lawyer has to do to track down the debtor and complete the fraudulent transfer, the creditor`s attorney`s fees can be substantial. However, if the court does not find that there is a genuine intent to defraud, no attorneys` fees will be awarded. This is a stark contrast between the U.S. and Canadian legal systems. The winner will not automatically receive attorneys` fees from the loser in U.S. courts, unless there is a contract or law that provides when attorneys` fees will be awarded, or in the rare cases where the conduct is so egregious that punitive damages are awarded.
The tip point: Make sure your contracts include a fee policy. According to NYDCL § 276, “any transfer and obligation entered into with real intent, contrary to the legally presumed intention to impede, delay or defraud current or future creditors, is fraudulent with respect to present and future creditors.” If there is indeed an intention to defraud creditors as a result of the transfer, it is not necessary to prove that the transfer was used for less than adequate remuneration or that the transfer rendered the debtor insolvent. Obviously, however, these two elements will be indications of a real intention to deceive. Bill Billionaire was clearly not trying to stop Jane Smith from raising the $10,000 he owed her. On the other hand, when your buyer`s customer submitted this to Rembrandt, it was the only asset they had to pay the amount owed to you. The actual intention to defraud you is obvious at the time of the transfer and the impact of the transfer on the net assets of the principal. What about the part of NYDCL section 273 that requires the debtor to become insolvent as a result of the transfer? NYDCL § 271 states that “a person is insolvent if the current fair sale value of its assets is less than the amount required to pay its probable liabilities for its existing debts when they become absolute and mature.” This definition makes sense because if the person has assets that are greater than their debts, the debtor has assets from which the creditor can recover the amount owing. So if Bill Billionaire owes Jane Smith $10,000 and Bill Billionaire owes a family member a $500,000 property for $1, the billionaire still has about $100 billion in small change for which Jane Smith can collect the $10,000 he owes her. (1) If a transfer or obligation is fraudulent against a creditor, then when his claim has become due, that creditor may sue any person other than a buyer without knowledge of the fraud at the time of purchase or against any person who immediately obtained the ownership or intermediary of such a buyer, according to the NYDCL there is intentional fraud and also suspicion of fraud.
Transfers that are not intended for reasonable consideration are presumed to be fraudulent – it is not necessary to prove an intention to defraud the creditor – if the transfer is made for less than sufficient consideration. “Any transfer or obligation of a person which thereby becomes or becomes insolvent is fraudulent against creditors, irrespective of their real intention, if the transfer is made or if the obligation is entered into without adequate consideration.” NYDCL § 273 NYDCL § 279 provides for the possibility that the fraudulent transfer took place before the creditor sent the invoice to the debtor. In this case, the person who received the fraudulent transfer may be prevented by the court from disposing of the property. The law provides that a creditor whose claim has not matured may bring an action in a court of competent jurisdiction against any person against whom it could have brought an action if its claim had become due, and the court may: However, you can still collect the debt under the New York State Debtor-Creditors Act (NYDCL). The NYDCL provides that a “fraudulent transfer” by the debtor may be effected by the creditor, meaning that the creditor “may ignore the transfer and involve or involve enforcement of the transferred assets.” NYDCL § 278 (1) (a). In short, if the transfer is significantly less than the market value, it is not made as fair consideration. Fair market value is usually an objective standard, whether for real property, durable property or intellectual property. If property valued at $500,000 is securitized to a family member for $1, or if a truck valued at $30,000 is sold for $1,000, the transaction is not fair. (b) in accordance with the second paragraph of subsection (a) of section two hundred and seventy-three or paragraph (a) of article two hundred and seventy-four of this article, not later than four years after the transfer or the occurrence of the obligation; or. 2.
A buyer who, without real intent, has provided only reasonable consideration for the transfer or obligation may retain the title or obligation as a guarantee of repayment. b. Skip the transfer and enter or apply execution to the transferred asset. The diversity of judicial opinion formation in competing federal and state jurisdictions can sometimes lead to different “paths,” and the Fraudulent Transfers Act, codified in the New York Debtors and Creditors Act (DCL), provides a striking example of these reciprocal judicial currents. This article focuses on the state of the law under the former DCL. (a) in accordance with section two hundred and seventy-three paragraph one of subsection (a) of this section, not later than four years after the transfer or occurrence of the obligation or, if later, not later than one year after the transfer or undertaking was discovered by the applicant or could reasonably have been discovered; Has this ever happened to you? You sell a product to a company in upstate New York whose customer personally guarantees payment.