Good Faith Purchasers in Fraudulent Transfers Are Entitled to Protection

By Fredrick P. Niemann, a NJ Fraud Attorney

As an innocent party who simply purchased property from someone who has made a fraudulent transfer, you may be entitled to protections under the New Jersey Fraudulent Transfer Act, if certain conditions are met. New Jersey law protects good faith purchasers from creditors, even if the person who sold you the items was intentionally defrauding their creditors.

First, the property must have been purchased in good faith. You, as the transferee (person who bought the property), must be innocent in the transaction. You must not have had any knowledge of the fraudulent transaction or the fraudulent intent of the person selling you the property. Next, you must also have paid value for what you received. The law will not protect you if the item was simply given to you.

Creditors who obtain judgments against the debtor who sold you the property may not then obtain a judgment against you to recover the item. You, as the good faith purchaser, will be protected. Furthermore, if you were to then sell the item to someone else, they too would be protected from creditors. Those who have close relationships with the debtors, called insiders, are scrutinized closely by the Courts in transactions with the debtor. One defense available to insiders is if the transaction was made in good faith to rehabilitate the debtor. This defense is extremely complicated and requires close analysis, but generally involves showing you paid fair market value for the item and were attempting to help the debtor satisfy a debt.

As a good faith purchaser, you have the right to keep the item you purchased in a fraudulent transfer. This may not stop creditors from coming after you, however. Call Fredrick P. Niemann, Esq., an experienced fraud attorney today if you have any questions related to a fraudulent transaction. He can be reached at 855-376-5291 or by email at fniemann@hnlawfirm.com/. He welcomes your questions.

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