The purpose of the Uniform Fraudulent Transfer Act (UFTA)—which is currently adopted as law in 43 states—is to prevent fraudulent transfers of property by a debtor who intends to defraud creditors by placing assets beyond their reach. The UFTA creates a statutory cause of action through which a creditor may seek recourse for a fraudulent transfer of assets or property.
The UFTA provides that a transfer of an asset is fraudulent, as to a creditor, if the debtor made the transfer with the actual intent to hinder, delay or defraud any of the debtor's creditors.
And UFTA section 24.005(b) lists 11, non-exhaustive "badges of fraud" to assist in determining whether the debtor made the transfer with the required fraudulent intent: (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 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; (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 who transferred the assets to an insider of the debtor.
When a creditor establishes a fraudulent transfer, section 24.008 sets forth the remedies available to the creditor. The section 24.008 remedies include an avoidance of the obligation to the extent necessary to satisfy the creditor's claim, an attachment against the asset transferred, or, subject to applicable principles of equity and in accordance with the rules of civil procedure, an injunction against further disposition of the asset transferred, the appointment of a receiver to take charge of the asset transferred, or any other relief the circumstances may require.
In Texas, the Uniform Fraudulent Transfer Act (UFTA) is designed to protect creditors from debtors who attempt to defraud them by transferring assets out of reach. Under the UFTA, a transfer can be deemed fraudulent if it was made with the intent to hinder, delay, or defraud creditors. Texas law, specifically UFTA section 24.005(b), provides a list of 'badges of fraud' that help determine the debtor's intent. These include transfers to insiders, concealment of the transfer, transfer of nearly all assets, insolvency following the transfer, and others. If a creditor can prove a transfer was fraudulent, they have several remedies available as outlined in section 24.008. These remedies include voiding the fraudulent transfer, attaching the asset, obtaining an injunction, appointing a receiver, or other appropriate relief. It's important for creditors to understand these provisions to protect their interests and for debtors to be aware of the legal consequences of such transfers.
