NJ FRAUDULENT TRANSFER
New Jersey has laws on transfers of money when a person or business is broke, near broke or technically insolvent, particularly if the transfer is intended to defraud creditors. The law(s) is called the NJ Uniform Fraudulent Transfer Act (“UFTA”). The UFTA lets creditors ultimately challenge and void the transfer of money, property or assets made by a debtor if the transfer has the effect of placing the money, property or assets out of the reach of present and sometimes future creditors.
LEARN THE FIVE TYPES OF FRAUDULENT TRANSFERS UNDER THE NJ FRAUDULENT TRANSFER ACT
N.J.S.A. 25:2-25 and N.J.S.A. 25:2-27 are the central provisions of the Fraudulent Transfer Act. These statutes make the following types of transfers fraudulent under New Jersey law:
(A) A transfer made with the actual intent to defraud one’s creditors;
(B) A transfer made by a business without receiving a reasonably equal value in exchange and which leaves the business with money, property and assets worth less than their debts;
(C) A transfer without receiving a reasonably equal value in exchange, knowing (or should have known) at the time of the transfer that he/she would incur debts in the future beyond his/her ability to pay them.
THE KEY CONCEPTS IN THE NJ FRAUDULENT TRANSFER LAW TO UNDERSTAND ARE CONSIDERATION AND “REASONABLY EQUIVALENT VALUE”
The term “value” is critical when evaluating whether or not there has been a fraudulent transfer in New Jersey. The law also has adopted the concept of “reasonably equivalent value”.
FRAUDULENT TRANSFER: ACTUAL INTENT TO PROVE “FRAUD”
Under the law, a fraudulent act exists when a debtor transfers ownership in property to another with the actual intent to hinder, delay, or defraud a creditor of the debtor.” Proving the fraudulent intent of the debtor is necessary under one provision of the law.
Factors to Be Considered to Establish “Actual Fraudulent Intent” Under the NJ Fraudulent Transfer Act
Actual intent can be difficult to prove and “often must be established through inferential reasoning, deduced from the circumstances surrounding the allegedly fraudulent act.” Let’s face it, few people will admit with a straight face that they transferred valuable property for nothing out of the goodness of their heart. If that were the case, they’d claim a charitable contribution under the IRS tax code. Given this reality, New Jersey has evaluated “actual intent” using the following factors. Note that not all factors have to be found to exist before a violation of the statute exists.
(A) The transfer or obligation was to a person or business relationship close to the debtor;
(B) The debtor in some real or indirect way maintained actual possession or control of the property transferred after the transfer;
(C) The transfer was disclosed or concealed from the creditor and others;
(D) Before the transfer the debtor had been sued, threatened with suit or was broke;
(E) The transfer was of substantially all the debtor’s assets;
(F) The debtor has secreted themselves or is “suddenly unavailable”;
(G) The debtor relocated to another location or concealed the assets;
(H) The value of the property or asset given back by the debtor was not reasonably equal to the value of the property or asset transferred or the amount of the debt incurred;
(I) The debtor was insolvent or became insolvent after the transfer was made or the debt was incurred;
(J) The transfer occurred before or shortly after a substantial debt was incurred by the debtor; and
(K) The debtor transferred the essential assets of his/her business to a creditor with a secured or unsecured interest who then transferred the assets to an insider of the debtor.
In NJ our courts will consider any of the above factors to establish a fraudulent transfer. As previously stated, there need not exist all eleven enumerated factors to exist fraudulent intent to exist.
Who has the burden of proof to establish that a fraudulent transfer occurred in NJ
If you believe a debtor of yours has perpetrated a fraudulent transfer, you have the burden of proving that the transfer was intentionally fraudulent. This burden of proof requires that an experienced and capable NJ business law attorney evaluate the facts of your case. If you are a debtor being sued or a creditor who has been defrauded, contact Fredrick P. Niemann, Esq. at (855) 376-5291 or email him at email@example.com for a consultation to discuss and analyze your individual case.