Uniform Fraudulent Transfer Act - Essential Information

Uniform Fraudulent Transfer Act - Essential Information "People who declare bankruptcy frequently recognize that they will lose the majority of their assets. In an effort to prevent creditors from removing some of their valuable possessions, they distribute them, sometimes to loved ones. However, sizable asset transfers can raise suspicion among trustees, judges, and even creditors.Today, the Fraudulent Transfer Act permits creditors to reverse certain unfair transactions that took place prior to the bankruptcy. When an asset is transferred for a relatively low price at a time when the debtor was insolvent, the transaction can be undone. Debtor is insolvent if his obligations exceed his assets. Mr. Smith's decision to sell his 40,000-dollar Mercedes to his neighbor for 20,000 dollars is an illustration of this type of transaction. Due to the absence of liens, the Mercedes would be an asset that creditors could seize in a chapter 7 bankruptcy. Prior to the transaction between Mr. Smith and his neighbor, the creditors would have recovered a portion of their initial investment, the Mercedes's partial value. However, after the transaction, Mr. Smith's creditors will only be able to recover $20,000 from the sale of the Mercedes. Obviously, this assumes Mr. Smith still has the money. The Uniform Fraudulent Transfer Act permits the transfer to be reversed and the creditors to recover the Mercedes from the neighbor.The law makes complete sense. Mr. Smith's transaction is regarded as presumptively fraudulent. After all, the $20,000 that Mr. Smith is giving away to his neighbor in the form of a Mercedes belongs to his creditors, not him. Consequently, it is presumed to be fraud.
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