California Uniform Voidable Transactions Act Replaces Fraudulent Transfer Act

A key development for creditors seeking to collect business debt or collect judgments in California:

In July of 2015, the Uniform Voidable Transactions Act was signed into California law. This new law has implications for both debtors and creditors, as it modifies and replaces the former Uniform Fraudulent Transfer Act. Traditionally, this law set forth the conditions that constituted a transfer as fraudulent, along with the remedies available to creditors with respect to such fraudulent transfers. An example of said remedies include the voiding of the transfer.

The new law stipulates the burden of proof necessary to make and defend a claim for relief under this law and alters various definitions within the former act. For instance, it replaces the term “fraudulent” with the term “voidable.” The new law’s provisions only apply to matters where the right of action accrued, the transfer was made, or the obligation was incurred on or after the January 1, 2016.

Some of the more significant amendments to the former law include the following:

  • Creditors are now permitted to procure remedies related to the transferred asset and obtain an attachment.
  • The law stipulates that a transfer or obligation is not voidable against a person who took the secured asset in good faith and for a reasonably equivalent value.
  • The burden is on the transferee to prove that he or she is a transferee in good faith.
  • The special insolvency test for debtors that are partnerships is repealed and the new law stipulates that debtors that don’t pay their debts as they come due are presumed to be insolvent.
  • To successfully raise an available defense all of the elements of that defense must be successfully proven.
  • Creditors seeking recovery under the law must prove each element of the recovery being sought.
  • The law requires that the presumptively insolvent party meet a burden of proving solvency.

Clearly the new law contains information that is imperative for all relevant parties to be aware of.  The Wallin Firm is experienced in navigating through the ever-changing legal landscape, particularly relating to creditor’s and debtors issues.  It has assisted many businesses and individuals in the Orange, Los Angeles, and Riverside County areas with their various collection and bankruptcy matters.


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