Tags: Fraudulent | Transfers | Uniform | Voidable Transactions

Fraudulent Transfers May No Longer Be Fraudulent

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Sunday, 07 Jun 2015 08:06 PM Current | Bio | Archive

A lot of people invested in real estate and mortgaged their life away.

Others unexpectedly incurred large medical bills which they couldn’t afford to pay. Some wound up with large legal judgments against them because they were a company officer or director or a partner and held financially liable for corporate or partnership actions.

In fact, the catalogue of ways you can get sued and be faced with crushing financial liability is likely the longest list (and getting longer) in the history of the world.

When it comes to inventing legal theories creating liability—and glomming on to large contingency based fees--lawyers are extraordinarily resourceful.

Oh, you say, that is an easy one to deal with. I’ll just transfer all my assets to someone else like my wife, or brother, or a trust. That way I will be uncollectible and yet keep my financial assets free from any lawsuit judgments.

Then you talk to your friendly lawyer who informs you that transferring your assets to avoid creditors, even future ones that don’t even exist yet, might well be treated as a “fraudulent transfer.”

He tells you the law doesn’t like people who transfer their assets to hinder, delay, or defraud their creditors.

The law of what is known as “fraudulent conveyances” or “fraudulent transfers” is embodied in two uniform laws. These have been enacted into law in one form or another in just about every state in the United States.

The word fraud as used in this context has various meanings depending on whether the judge knows the difference between fraud and a fraudulent transfer.

In fact even the Bar Associations have had a difficult time knowing which is which. This has resulted in some states holding lawyers and others liable for conspiracy or aiding and abetting a fraudulent transfer.

In terms of the fraudulent transfer law, a fraud per se was not a requirement for the law to apply.

The fact that there is so much controversy over the interpretation of the meaning of the law of “fraudulent conveyances” or “fraudulent transfers” highlights the weaknesses and lack intellectual honesty pervasive in the legal system.

Wisely, the Commissioners on the Uniform Law Commission, the adults looking over the legal sandbox, have proposed to clear this up.

They propose that the states substitute certain parts of the existing law with the provisions of the Uniform Voidable Transactions Act.

While the changes still allow a creditor to go after a debtor’s “voidable” transactions, this legal process is no longer colored by the debtor being treated as defrauding a creditor just because he or she is liable for a debt.

This is a big deal.

Lawyers will be far better able to advise their clients of their legal rights as well as obligations. It eliminates a significant amount of subjectivity which has always suffered from judges, lawyers and Bar Associations having certain cognitive biases when looking at any particular case.

The new Uniform Voidable Transactions Act is a very good thing indeed.

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Kleinfeld
A lot of people invested in real estate and mortgaged their life away. Others unexpectedly incurred large medical bills which they couldn't afford to pay.
Fraudulent, Transfers, Uniform, Voidable Transactions
498
2015-06-07
Sunday, 07 Jun 2015 08:06 PM
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