Uniform Fraudulent Transfer Act - What You Need to Know
Posted on June 30, 2008
Filed Under Debt Consolidation, Avoid Bankruptcy, Business Bankruptcy, Chapert 11, Chapter 13, Blog Carnivals |
Oftentimes people going into bankruptcy realize that they will loose most of their assets. Trying to avoid creditors from taking away some of their precious possessions they attempt to distribute them, sometimes to their loved once. However, large transfers of assets can raise suspicion in a trustee, judge or even in creditors.
Today the Fraudulent Transfer Act allows creditors to undo some unfair transactions that occurred prior to the bankruptcy. One type of a transaction that can be undone is when an asset is transferred for a fairly low price at a time when the debtor was insolvent. Debtor is insolvent when his liabilities exceeded his equity. An example of such a transaction can be seen when Mr. Smith decides that he wants to sell his 40,000 dollar Mercedes to his neighbor for 20,000 dollars. Having no liens on the car, makes the Mercedes part of an asset that creditors would be allowed to get in a chapter 7 bankruptcy. Prior to the transaction, between Mr. Smith and his neighbor, the creditors would have gotten at least some of their investment back, partial value of the Mercedes. However, after the transaction, the creditors will only be able to get 20,000 dollars that Mr. Smith got from the sale of the Mercedes. This is of course assuming that Mr. Smith still has the money. The Uniform Fraudulent Transfer Act allows the transfer to be undone and the creditors to get the Mercedes back from the neighbor.
The statute makes perfect sense. Mr. Smith transaction is seen as a presumptively fraudulent transaction. After all the 20,000 dollars that Mr. Smith is giving away to his neighbor, in the form of the Mercedes, is actually not his but his creditors. So in fact it is fraud, presumptive fraud.
For more information about Real-Estate-Transfers, visit the popular blog at http://newinfopost.com/bankruptcy/fraudulent-transfers
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