The Uniform Voidable Transactions Act Replaces the Fraudulent Transfer Act

In July 2015, the Uniform Voidable Transactions Act was signed into California law.  This law has implications for both debtors and creditors, as it modifies and replaces the former Uniform Fraudulent Transfer Act.

Collecting debt in California can involve pursuing fraudulent transfer claims.  Debtors often transfer away their assets in the hopes of preventing levy.  Creditors should assert fraudulent transfer claims against both debtors and the recipients of the fraudulent transfers.

The Uniform Voidable Transactions Act: (1) shifts the burden of proof in certain aspects of fraudulent transfer claims, and (2) alters certain definitions under the Act.  For example, the word “fraudulent” has been replaced with the term “voidable.”  The law’s provisions only apply where the right of action accrued, the transfer was made, or the obligation was incurred on or after the January 1, 2016.

The significant changes to the former law include the following:

• Creditors are allowed to obtain remedies related to the fraudulently transferred asset(s) and obtain attachment.
• A transfer is not voidable against a person who received the asset in good faith and for a reasonably equivalent value.
• The burden is on the transferee to prove that he or she is a transferee in good faith.
• The presumptively insolvent party must meet a burden of proving solvency.