Kentucky Enacts the Uniform Voidable Transactions Act
By Margaret Wright J.D.
The Kentucky Legislature has recently enacted the Uniform Voidable Transactions Act concerning creditor claims where the debtor has subsequently transferred the asset or incurred obligation under certain circumstances. The Act takes effect January 1, 2016.
Under the Act, voidable transactions are outlined as follows:
(1) A transfer made or obligation incurred by a debtor is voidable as to a creditor, whether the creditor’s claim arose before or after the transfer was made or the obligation was incurred, if the debtor made the transfer or incurred the obligation:
(a) With actual intent to hinder, delay, or defraud any creditor of the debtor; or
(b) Without receiving a reasonably equivalent value in exchange for the transfer or obligation, and the debtor:
1. Was engaged or was about to engage in a business or a transaction which the remaining assets of the debtor were unreasonably small in relation to the business or transaction; or
2. Intended to incur, or believed or reasonably should have believed that the debtor would incur, debts beyond the debtor’s ability to pay as they became due.
In the determination of actual intent, the Act includes a listing of considerations which includes in part the debtor’s retention or control of the property after transfer, the insider status of the transferee, the debtor had been sued or threatened with suit prior to the transfer, the transfer was substantially all of the debtor’s assets; the debtor removed or concealed assets, the debtor was or became insolvent shortly after the transfer or the debtor absconded.
A creditor making a claim for relief under this Act has the burden to prove that the transfer is voidable. Where the creditor has satisfied the burden of proof, the following relief may be obtained:
A voidance of the transfer or obligation to the extent necessary to satisfy the creditor’s claim;
An attachment against the asset transferred or other property of the transferee as applicable;
An injunction against further disposition by the debtor or transferee of the asset transferred or other property;
Appointment of a receiver to take charge of the asset transferred or other property of the transferee; or
If judgment is obtained by the creditor, an execution may be levied on the asset transferred or its proceeds.
A creditor may recover judgment for the lesser of the adjusted value of the asset or the amount necessary to satisfy the claim. Judgment may be entered against the first transferee or an immediate or mediate transferee of the first transferee.
However, the Act notes a transfer is not voidable against a person, or any subsequent transferee, whom has taken in good faith and as to whom reasonably equivalent value has been given. A good faith transferee is entitled to a lien or a right to retain interest in the asset, enforcement of the obligation, or a reduction in the amount of the liability on the judgment. Additional situations under which a transfer is not voidable include circumstances involving the termination of a lease, enforcement of a security interest, transfers made in the ordinary course of business or transfers made pursuant to a good faith effort made to rehabilitate the debtor.
Margaret Wright, J.D. is Vice President and Regulatory Compliance Director at Bankers Advisory. She is a graduate of Stonehill College and earned her Juris Doctor at Suffolk University Law School. Margaret is admitted to the Bar in Massachusetts. She can be reached at Margaret@bankersadvisory.com
Margaret Wright, JD, is regulatory compliance director with CLA. She is a graduate of Stonehill College and earned her juris doctor at Suffolk University Law School. She is admitted to the Massachusetts Bar.
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