Relates to enacting the uniform voidable transactions act; repealer

Section two of the bill repeals Article 10 of the Debtor and Creditor law ("Fraudulent Conveyances") and enacts a new Article 10 ("Uniform Voidable Transactions Act"), which contains the following pieces:

Section 270 Definitions Section 271 Insolvency Section 272 Value Section 273 Transfer or obligation voidable as to present or future creditor Section 274 Transfer or obligation voidable as to present creditor Section 275 When transfer is made or obligation is incurred Section 276 Remedies of creditor Section 277 Defenses, liability, and protection of transferee or obligee Section 278 Extinguishment of claim for relief Section 279 Governing Law Section 280 Supplementary provisions Section 281 Uniformity of application and construction Section 281-a Relation to electronic signatures in global and national commerce act

Section three of the bill amends Section 5205(c)(5) of the CPLR to update a reference to "fraudulent conveyances" so that it now refers to "voidable transactions."

Section four of the bill amends Section 5519(g) of the CPLR to update a reference to "fraudulent conveyances" so that it now refers to "voidable transactions."

Section five of the bill amends Section 7-3.1(b)(4) of the EPTL to update a reference to "fraudulent conveyances" so that it now refers to "voidable transactions."

Section six of the bill updates a cross-reference to Section 273 of the Debtor and Creditor Law so that it properly references the updated Section 274(a) of the Debtor and Creditor Law.

Justification

This bill would enact a needed update to New York's Debtor and Creditor Law. New York's current Fraudulent Conveyances Act (Article 10) was enacted in 1925, based on a proposal developed by the Uniform Law Commissioners in 1918.

After enactment of the federal Bankruptcy Reform Act of 1978, the Uniform Law Commissioners revisited this issue and in 1984 they submitted an updated version entitled the Uniform Fraudulent Transfer Act. While that legislation was adopted by almost every state, it was never enacted in New York. Today, only New York and Maryland continue to operate under a 1920s-era law.

There have been several major developments since the enactment of New York's current law in 1925, including the enactment of the federal bankruptcy laws and the enactment of a Uniform Commercial Code. New York's law is now inconsistent in many ways with federal bankruptcy laws and the laws in most parts of the country.

This inconsistency, and the application of a number of outdated provisions, have added costs and complexity to the process, to the detriment of creditors, debtors and recipients of transfers alike. In addition, it has become increasingly noted that New York's outdated law can have unintended consequences. For example, although certain property is deemed by law to be exempt from creditors, there have been cases in which the transfer of such exempt assets may be subject to New York's existing fraudulent conveyances act, thereby allowing creditors to seize assets that would otherwise be exempt.

This bill would adopt the Uniform Law Commission's 2014 revised version of the Uniform Fraudulent Transfer Act, now known as the Uniform Voidable Transfers Act. The 2014 revisions made a number of improvements to the 1984 version, including changing and clarifying terminology (such as referring to "voidable transfers" instead of the potentially misleading phrase "fraudulent transfers"); clarifying the choice-of-law determination; improving provisions for determining insolvency; and clarifying the burden of proof of each party.

This new act maintains the basic principles of New York's longstanding law, but makes the law more consistent, predictable, efficient and cost effective.

Legislative history

New bill

Fiscal implications

None to the State

Effective date

This act shall take effect 120 days after it shall have become law, and shall apply to a transfer made or obligation incurred on or after such effective date, but shall not apply to a transfer made or obligation incurred before such effective date, nor shall it apply to a right of action that has accrued before such effective date. For the foregoing purposes, a transfer is made and an obligation is incurred at the time provided in Section 275 of the Debtor and Creditor Law as added by Section 2 of this Act.