It depends on a number of factors.Ĭopyright © Hanlon Niemann & Wright, P.C. A transferee may have defenses to a creditor’s attempt to void a transfer, which are unavailable to the transferor debtor who made the transfer. If the creditor can set aside a transfer, he or she can pursue the transferee and obtain a judgment against the transferee (plus the transferor) for damages and other relief. Remedies Against Transferees Under the NJ Fraudulent Transfer ActĪs mentioned earlier, a creditor in NJ has recourse against a transferee of fraudulently transferred property. For example, father’s pre-death transfer of funds to his children was set aside to satisfy his wife’s claim under an equitable distribution agreement when it was discovered that the transfer left the husband insolvent. Under the UFTA, creditors of bankrupt or insolvent businesses who wrongfully paid salaries, dividends, profits, or made loans to shareholders, family members and others without receiving fair consideration in return, are entitled to have those transfers, funds set aside. The Fraudulent Transfer Act is particularly helpful to a victim of a fraudulent transfer since the primary remedy under the law is to set aside the fraudulent transfer, regain possession or the value of the property or funds transferred, to satisfy the creditor’s claim. The Primary Remedy Under the NJ Fraudulent Transfer Act is to Set Aside the Transfer These remedies include: (1) voiding the transfer or obligation to satisfy the debt, (2) obtaining a prejudgment seizure against the transferred asset or property of the transferee, (3) restraining the further transfer or relocation of the asset, (4) seeking the appointment of a receiver to protect the asset, (5) damages.
New Jersey has legal remedies available to individuals and businesses that have been the subject of a fraudulent transfer. What are a Creditor’s Remedies Under the New Jersey Fraudulent Transfer Act? Your case is proven by virtue of the fact you (1) can’t get paid, (2) the debtor transferred assets or property without receiving in response equal or reasonably equal consideration. Here you do not have to prove that the debtor actually intended to defraud his or her creditors when the transfer was made. A cause of action exists when a debtor makes a transfer of money, property or assets just before the debtor is about to incur a significant liability debt or when the entity is incapable of paying its bills. The above description is perhaps the most common under the NJ Uniform Fraudulent Transfer Act. THE MOST COMMON CLAIM BROUGHT FOR A FRAUDULENT TRANSFER IS WHEN A DEBTOR TRANSFERS FUNDS OR PROPERTY TO A THIRD PARTY JUST BEFORE OR AFTER INCURRING A SIZEABLE DEBT Both existing and future creditors have standing to avail themselves of protection under the Act, especially if they extended credit or provided capital without knowledge of the under-capitalized business. When this type of business fraud is alleged, three elements must be proven: (1) a transfer was made by the debtor, (2) without the debtor receiving a reasonably equal value in exchange, (3) the debtor is an under-capitalized business. PROVING A FRAUDULENT TRANSFER: WHEN A NJ CORPORATION OR NJ BUSINESS IS UNDER-CAPITALIZEDĪnother means of proving a fraudulent transfer under NJ law involves the debtor operating their business at a time when the debtor’s funds are inadequate to operate the business in the ordinary course. A business entity is deemed insolvent if the debts of the business entity exceed the fair market value of the entity’s assets.Is the debtor paying his or her bills as they become due? If not, then the transfer is presumed to be insolvent.Are the debts greater than all of the debtor’s assets when appraised at fair market value?.The NJ Fraudulent Transfer Act establishes three tests to determine insolvency.
What Does “Insolvency” Mean Under the Law? To prove an alleged fraudulent transfer based on insolvency you must show that: (1) a transfer was made, (2) without the debtor receiving a reasonably equal dollar value in exchange, and (3) at the time of the transfer the debtor was or was close to being insolvent and because of the transfer the debtor becomes insolvent. Proving a Fraudulent Transfer When the Debtor is Insolvent or Near Insolvency A second means of proving a fraudulent transfer is when a transfer renders the debtor insolvent or near insolvency when the debtor is insolvent just before the actual transfer. If you transfer property for little or no consideration, a “fraudulent transfer” likely exists.
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