November 12, 2014
Authored by: Keith Aurzada and Mark Duedall
In July 2014, the National Conference of Commissioners on Uniform State Laws (NCCUSL) approved the Uniform Voidable Transaction Act (UVTA), a long-awaited update to the Uniform Fraudulent Transactions Act (UFTA). As the new title suggests, the UVTA, like the UFTA before it, encompasses a broader range of transactions than those traditionally deemed fraudulent and therefore avoidable under the common law. The amended Act clarifies and expands the burden of proof as well as presenting new challenges and opportunities to creditors seeking to avoid transfers by debtors operating under insolvent conditions. This development also has importance for creditors with claims in bankruptcy due to the bankruptcy trustee’s power to bring avoidance actions based on state law under 11 U.S.C. § 544(b) and thereby increase the assets available to repay debts.
Under the amended Act as before, creditors bringing constructive fraudulent transfer claims have the ability to avoid transactions which deprive the debtor of assets that could otherwise satisfy debts to creditors when the debtor is or is presumed to be insolvent; however, several key updates affect which debtors are insolvent within the meaning of the amended Act. The UFTA specifies that a debtor is presumed to be insolvent when it is