(A) made such transfer or incurred such obligation with actual intent to hinder, delay, or defraud any entity to which the debtor was or became, on or after the date that such transfer was made or such obligation was incurred, indebted or Section 548(a) of the Federal Bankruptcy Code (labeled “fraudulent transfers and obligations”) provides, “he trustee may avoid any transfer… of an interest of the debtor in property, or any obligation… incurred by the debtor, that was made or incurred on or within 2 years before the date of the filing of the petition, if the debtor voluntarily or involuntarily: However, a trustee or debtor-in-possession can assert state law claims and benefit from the longer statute of limitations in the UFTA. 2 The statute of limitations in the applicable section of the Bankruptcy Code, §548, is expressed as being two years. The UFTA contains its own statute of limitations which extinguishes any claim not brought “within four years after the transfer was made or the obligation was incurred,” unless the fraud was intentional and was not discovered until a later time, in which event the limitations period is extended for an additional year after such discovery “was or could reasonably have been discovered by the claimant.” 1 In at least one state, the initial limitation period is six years instead of four. One key difference which needs to be illuminated, however, relates to the applicable statutes of limitations. The UFTA is a self-described “modernization” of the fraudulent transfer laws in the United States and is currently in effect in more than 40 states and in the District of Columbia.Īlthough the UFTA differs some from the fraudulent conveyance laws comprising a portion of the Federal Bankruptcy Code, it is sufficiently similar in many respects that the remainder of this edition of Dispatches from the Trenches focuses on the tests and rules within the Bankruptcy Code. In 1984, the UFCA was revised and renamed the Uniform Fraudulent Transfer Act (UFTA) in part to address changes under federal law with respect to fraudulent transfers set forth in the Bankruptcy Reform Act of 1978. Concepts rooted in that English law formed part of the common law of the United States for many years and were eventually codified in the majority of States pursuant to the Uniform Fraudulent Conveyance Act. Modern fraudulent transfer laws had their genesis way back in jolly ol’ England with the Statute of 13 Elizabeth, passed by the English Parliament in 1571. General Background & Sources of Fraudulent Transfer Laws This edition of Dispatches from the Trenches discusses these laws and what prudent financiers should know. Notwithstanding the nefarious-sounding name, fraudulent transfer laws can create problems for financiers who have nothing but honest intentions. “Fraudulent transfers” sound like the sleazy types of transactions generally associated with the likes of Bernie Madoff and Enron.
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