What's happening
This bill repeals and replaces New York's fraudulent conveyance laws with the Uniform Voidable Transactions Act, updating rules for voiding certain asset transfers to prevent creditor fraud.
Why it matters
Modernizes and clarifies key definitions and standards. for when asset transfers can be voided, such as "insider," "affiliate," "value," and "insolvency," making it easier for courts and parties to assess whether a transaction was improper or legitimate.
Shifts focus from "fraudulent conveyance" to "voidable transaction". removing the need to prove actual fraud in some cases, and instead voiding certain transfers based on lack of “reasonably equivalent value” and/or insolvency, which broadens the scope for creditor recovery and modernizes creditor protection.
Establishes a uniform, evidence-based approach. to creditor remedies and defenses, including clear burdens of proof, specific time limits for bringing claims (generally four years), and protections for good-faith transferees—reducing uncertainty and aligning New York with practices in other states.
Integrates with existing statutes and electronic commerce. by updating related laws (e.g., civil practice and workers’ compensation) to reference the new standards, and clarifying how the law interacts with electronic records and signatures, promoting consistency and legal clarity across financial and legal transactions.
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Who cares
Headline styles
Stop Fraudulent Asset Transfers
Plain English, a few words. Used as the page title.
Sponsors
Senator · Senate District 42
1 Co-sponsor
History
- Referred to judiciary
- Committed to rules
- Amended on third reading 6180a
- Advanced to third reading
- 2nd report cal.
- 1st report cal.1135
- Referred to judiciary
Companion bill
The same bill in the other chamber. A bill becomes law when one version passes both houses and the governor signs it, so either number can carry it.
Update Fraud Law Language
In Senate Committee · Judiciary · Sponsor Helene Weinstein
Full text
10 pagesUnderlined is new[Struck] is removedOfficial text on nysenate.gov ↗
STATE OF NEW YORK
6180--A Cal. No. 1135
2017-2018 Regular Sessions
IN SENATE
May 11, 2017
Introduced by Sen. BONACIC -- read twice and ordered printed, and when printed to be committed to the Committee on Judiciary -- reported favorably from said committee, ordered to first and second report, ordered to a third reading, amended and ordered reprinted, retaining its place in the order of third reading
AN ACT to amend the debtor and creditor law, the civil practice law and rules, the estates, powers and trusts law and the workers' compensation law, in relation to enacting the "uniform voidable transactions act"; and to repeal certain provisions of the debtor and creditor law relating to fraudulent conveyances
The People of the State of New York, represented in Senate and Assembly, do enact as follows:
Section 1. Short title. This act shall be known and may be cited as the "uniform voidable transactions act".
§ 2. Article 10 of the debtor and creditor law is REPEALED and a new article 10 is added to read as follows:
ARTICLE 10
UNIFORM VOIDABLE TRANSACTIONS ACT Section 270. Definitions.
271. Insolvency.
272. Value.
273. Transfer or obligation voidable as to present or future
creditor.
274. Transfer or obligation voidable as to present creditor.
275. When transfer is made or obligation is incurred.
276. Remedies of creditor.
276-a. Attorney's fees in action or special proceeding under
this article to avoid a transfer or obligation.
277. Defenses, liability, and protection of transferee or
obligee.
278. Extinguishment of claim for relief.
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD06162-03-7
S. 6180--A 2
279. Governing law.
280. Supplementary provisions.
281. Uniformity of application and construction.
281-a. Relation to electronic signatures in global and national
commerce act.
§ 270. Definitions. As used in this article:
(a) "Affiliate" means:
(1) a person that directly or indirectly owns, controls or holds with power to vote, twenty percent or more of the outstanding voting securities of the debtor, other than a person that holds the securities:
(i) as a fiduciary or agent without sole discretionary power to vote the securities; or
(ii) solely to secure a debt, if the person has not in fact exercised the power to vote;
(2) a corporation twenty percent or more of whose outstanding voting securities are directly or indirectly owned, controlled or held with power to vote, by the debtor or a person that directly or indirectly owns, controls or holds, with power to vote, twenty percent or more of the outstanding voting securities of the debtor, other than a person that holds the securities:
(i) as a fiduciary or agent without sole discretionary power to vote the securities; or
(ii) solely to secure a debt, if the person has not in fact exercised the power to vote;
(3) a person whose business is operated by the debtor under a lease or other agreement, or a person substantially all of whose assets are controlled by the debtor; or
(4) a person that operates the debtor's business under a lease or other agreement or controls substantially all of the debtor's assets.
(b) "Asset" means property of a debtor, but the term does not include:
(1) property to the extent it is encumbered by a valid lien;
(2) property to the extent it is generally exempt under non-bankruptcy law; or
(3) an interest in property held in tenancy by the entirety to the extent it is not subject to process by a creditor holding a claim against only one tenant.
(c) "Claim", except as used in "claim for relief", means a right to payment, whether or not the right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured.
(d) "Creditor" means a person that has a claim.
(e) "Debt" means liability on a claim.
(f) "Debtor" means a person that is liable on a claim.
(g) "Electronic" means relating to technology having electrical, digital, magnetic, wireless, optical, electromagnetic or similar capabilities.
(h) "Insider" includes:
(1) if the debtor is an individual:
(i) a relative of the debtor or of a general partner of the debtor;
(ii) a partnership in which the debtor is a general partner;
(iii) a general partner in a partnership described in subparagraph (ii) of this paragraph; or
(iv) a corporation of which the debtor is a director, officer, or person in control;
(2) if the debtor is a corporation:
(i) a director of the debtor;
S. 6180--A 3
(ii) an officer of the debtor;
(iii) a person in control of the debtor;
(iv) a partnership in which the debtor is a general partner;
(v) a general partner in a partnership described in subparagraph (iv) of this paragraph; or
(vi) a relative of a general partner, director, officer or person in control of the debtor;
(3) if the debtor is a partnership:
(i) a general partner in the debtor;
(ii) a relative of a general partner in, a general partner of or a person in control of the debtor;
(iii) another partnership in which the debtor is a general partner;
(iv) a general partner in a partnership described in subparagraph (iii) of this paragraph; or
(v) a person in control of the debtor;
(4) an affiliate, or an insider of an affiliate as if the affiliate were the debtor; and
(5) a managing agent of the debtor.
(i) "Lien" means a charge against or an interest in property to secure payment of a debt or performance of an obligation, and includes a security interest created by agreement, a judicial lien obtained by legal or equitable process or proceedings, a common-law lien, or a statutory lien.
(j) "Organization" means a person other than an individual.
(k) "Person" means an individual, estate, partnership, association, trust, business or nonprofit entity, public corporation, government or governmental subdivision, agency or instrumentality, or other legal or commercial entity.
(l) "Property" means anything that may be the subject of ownership.
(m) "Record" means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form.
(n) "Relative" means an individual related by consanguinity within the third degree as determined by the common law, a spouse or an individual related to a spouse within the third degree as so determined, and includes an individual in an adoptive relationship within the third degree.
(o) "Sign" means, with present intent to authenticate or adopt a record:
(i) to execute or adopt a tangible symbol; or
(ii) to attach to or logically associate with the record an electronic symbol, sound, or process.
(p) "Transfer" means every mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing of or parting with an asset or an interest in an asset, and includes payment of money, release, lease, license, and creation of a lien or other encumbrance.
(q) "Valid lien" means a lien that is effective against the holder of a judicial lien subsequently obtained by legal or equitable process or proceedings.
§ 271. Insolvency. (a) A debtor is insolvent if, at a fair valuation, the sum of the debtor's debts is greater than the sum of the debtor's assets.
(b) A debtor that is generally not paying the debtor's debts as they become due other than as a result of a bona fide dispute is presumed to be insolvent. The presumption imposes on the party against which the
S. 6180--A 4
presumption is directed the burden of proving that the nonexistence of insolvency is more probable than its existence.
(c) Assets under this section do not include property that has been transferred, concealed or removed with intent to hinder, delay or defraud creditors, or that has been transferred in a manner making the transfer voidable under this article.
(d) Debts under this section do not include an obligation to the extent it is secured by a valid lien on property of the debtor not included as an asset.
§ 272. Value. (a) Value is given for a transfer or an obligation if, in exchange for the transfer or obligation, property is transferred or an antecedent debt is secured or satisfied, but value does not include an unperformed promise made otherwise than in the ordinary course of the promisor's business to furnish support to the debtor or another person.
(b) For the purposes of paragraph two of subdivision (a) of section two hundred seventy-three and section two hundred seventy-four of this article, a person gives a reasonably equivalent value if the person acquires an interest of the debtor in an asset pursuant to a regularly conducted, noncollusive foreclosure sale or execution of a power of sale for the acquisition or disposition of the interest of the debtor upon default under a mortgage, deed of trust, or security agreement.
(c) A transfer is made for present value if the exchange between the debtor and the transferee is intended by them to be contemporaneous and is in fact substantially contemporaneous.
§ 273. Transfer or obligation voidable as to present or future creditor. (a) A transfer made or obligation incurred by a debtor is voidable as to a creditor, whether the creditor's claim arose before or after the transfer was made or the obligation was incurred, if the debtor made the transfer or incurred the obligation:
(1) with actual intent to hinder, delay or defraud any creditor of the debtor; or
(2) without receiving a reasonably equivalent value in exchange for the transfer or obligation, and the debtor:
(i) was engaged or was about to engage in a business or a transaction for which the remaining assets of the debtor were unreasonably small in relation to the business or transaction; or
(ii) intended to incur, or believed or reasonably should have believed that the debtor would incur, debts beyond the debtor's ability to pay as they became due.
(b) In determining actual intent under paragraph one of subdivision (a) of this section, consideration may be given, among other factors, to whether:
(1) the transfer or obligation was to an insider;
(2) the debtor retained possession or control of the property transferred after the transfer;
(3) the transfer or obligation was disclosed or concealed;
(4) before the transfer was made or obligation was incurred, the debtor had been sued or threatened with suit;
(5) the transfer was of substantially all the debtor's assets;
(6) the debtor absconded;
(7) the debtor removed or concealed assets;
(8) the value of the consideration received by the debtor was reasonably equivalent to the value of the asset transferred or the amount of the obligation incurred;
(9) the debtor was insolvent or became insolvent shortly after the transfer was made or the obligation was incurred;
S. 6180--A 5
(10) the transfer occurred shortly before or shortly after a substantial debt was incurred; and
(11) the debtor transferred the essential assets of the business to a lienor that transferred the assets to an insider of the debtor.
(c) A creditor making a claim for relief under subdivision (a) of this section has the burden of proving the elements of the claim for relief by a preponderance of the evidence.
§ 274. Transfer or obligation voidable as to present creditor. (a) A transfer made or obligation incurred by a debtor is voidable as to a creditor whose claim arose before the transfer was made or the obligation was incurred if the debtor made the transfer or incurred the obligation without receiving a reasonably equivalent value in exchange for the transfer or obligation and the debtor was insolvent at that time or the debtor became insolvent as a result of the transfer or obligation.
(b) A transfer made by a debtor is voidable as to a creditor whose claim arose before the transfer was made if the transfer was made to an insider for an antecedent debt, the debtor was insolvent at that time, and the insider had reasonable cause to believe that the debtor was insolvent.
(c) Subject to subdivision (b) of section two hundred seventy-one of this article, a creditor making a claim for relief under subdivision (a) or (b) of this section has the burden of proving the elements of the claim for relief by a preponderance of the evidence.
§ 275. When transfer is made or obligation is incurred. For the purposes of this article:
(a) a transfer is made:
(1) with respect to an asset that is real property other than a fixture, but including the interest of a seller or purchaser under a contract for the sale of the asset, when the transfer is so far perfected that a good-faith purchaser of the asset from the debtor against which applicable law permits the transfer to be perfected cannot acquire an interest in the asset that is superior to the interest of the transferee; and
(2) with respect to an asset that is not real property or that is a fixture, when the transfer is so far perfected that a creditor on a simple contract cannot acquire a judicial lien otherwise than under this article that is superior to the interest of the transferee;
(b) if applicable law permits the transfer to be perfected as provided in subdivision (a) of this section and the transfer is not so perfected before the commencement of an action for relief under this article, the transfer is deemed made immediately before the commencement of the action;
Reflowed for reading: line numbers and page breaks removed. Cite the official text.
Sponsor's memo
Title of bill
An act to amend the debtor and creditor law, the civil practice law and rules, the estates, powers and trusts law and the workers' compensation law, in relation to enacting the "uniform voidable transactions act"; and to repeal certain provisions of the debtor and creditor law relating to fraudulent conveyances
Purpose of bill
This bill would update the Debtor and Creditor Law by replacing the 1925 Fraudulent Conveyances Act with the Uniform Voidable Transactions Act. This new law will make the system more efficient and cost effective, and ensure greater consistency with federal bankruptcy law.
Summary of provisions of bill
Section one of the bill provides that this act shall be known and may be cited as the "Uniform Voidable Transactions Act."
Read the full memo (834 words)
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 276-a - Attorneys fees in action or special proceeding to avoid a transfer or obligation
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, 2017.
Fiscal implications for state and local governments
None.
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.
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