Defending Against a Claimed Fraudulent Transfer

How to Defend Against a Claimed Fraudulent Transfer in NJ if You Are the Transferee

Being named a defendant in a lawsuit is unsettling, very unsettling. No doubt you’re feeling (great) anxiety and worry about the outcome and your financial future. I understand. I’m here for you. Let’s look at the law and some defenses we can use to protect you.

The Uniform Fraudulent Transfer Act (UFTA)

Under the Uniform Fraudulent Transfer Act (UFTA), a transferee who innocently receives a transfer of valuable property and has paid value for the transferred property is entitled to protection under New Jersey law, with certain conditions.

Innocent Transferees for Value are Entitled to Protection Under the Intent Fraudulent Transfer

If you received property or funds in good faith without knowledge of the transferor’s fraudulent intent and paid value for what you received (even if the transferor had the undisclosed intent to hinder, delay or defraud his/her creditors), you are entitled to qualified protection under NJ law and the transfer will not be voidable.

Legal Protection in New Jersey is Generally Available to All Good Faith Transferees for Value Down the Line

If you are a good faith transferee who paid value for what you received, you will generally be entitled to protection under the UFTA.

A creditor who is able to get a judgment against the transferor for the value of a fraudulently transferred asset cannot (in NJ) enter a judgment against a good-faith transferee for value. A later transferee who receives fraudulently transferred property from a good-faith transferee is also protected from a creditor’s judgment in New Jersey.

Defenses Available to Insiders

An important defense available to insiders (insiders are close family members or others in a close relationship(s) to the transferor) is if the transfer was made pursuant to a good-faith effort to rehabilitate the debtor” and if it “secured present value to the transfer for that purpose and for a pre-existing debt of the debtor”. A “good faith effort to rehabilitate the debtor” means that the transfer was done to provide sufficient additional value to the transferor in an effort to save or restore his/her business.

This defense is very complicated and requires a close factual and economic analysis. Obviously, there are other additional defenses available to you, depending on the facts of your case, like “commercially reasonable” actions, “good faith” and the like. Together we can evaluate each one in an effort to defeat or at least minimize your legal exposure to judgment.

Do you have a question(s) not addressed here? If so, contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at fniemann@hnlawfirm.com to schedule a consultation about your particular needs. He welcomes your calls and inquiries and you’ll find him very approachable and easy to talk to.