Justice Before Generosity: What Constitutes an Impermissible Transfer Under the New Hampshire Fraudulent Transfer Act
The New Hampshire Fraudulent Transfer Act’s somewhat foreboding title intimates that it applies to transfers made with a specific intent to defraud. While the Act does apply to transfers intended to escape creditors, the act also applies to transfers made with perfectly innocent motives if made by an insolvent debtor for less than adequate consideration. These kinds of transfers are considered to be constructively fraudulent. Examples of such “innocent” transactions can include spousal transfers pursuant to estate planning or divorce and to charitable donations. The policy rationale is obvious-if a debtor transfers valuable property while receiving nothing or little in return, the debtor’s creditors may be left without sufficient assets from which to satisfy their claims. “Debtors must first be just before they can be generous.”
The Congressional Conference of Commissioners on Uniform State Laws first promulgated the Uniform Fraudulent Conveyance Act in 1918. New Hampshire adopted the Act in 1919. With the advent of the Bankruptcy Reform Act in 1978 and the adoption of the Uniform Commercial Code (UCC) and the Model Corporation Act in the late 1970’s, the word “conveyance” was replaced by the word “transfer” in the Act’s title to clarify that the act applied to transfers of personal property, as well as real property. New Hampshire adopted the Uniform Fraudulent Transfer Act in 1988 and codified it at RSA 545:A.
RSA 545:A contains twelve sections. Section one is the primary definitional section and defines, for purposes of the Act, what qualifies as an asset, claim, debtor, creditor, affiliate or an insider. Sections two and three define insolvency and value. Sections four, five and six, the heart of the Act, set forth the conditions and elements of transfers that are deemed fraudulent to creditors. Section four contains a laundry list of so-called “badges of fraud”-factors that a court can consider when determining the intent of the transfer. In determining intent, consideration may be given, among other factors, to whether: (1) a transfer was to a family member or business partner; (2) the debtor retained possession or control of the property transferred; (3) the transfer was made while a lawsuit was pending against the debtor; and (4) the transfer was of substantially all of his or her assets.
Sections seven and eight relate to creditor remedies and to defenses. Remedies can include the avoidance of transfers, attachments against transferred assets, injunctions prohibiting further transfers and in extreme cases, the appointment of a receiver. Even if a transfer is found to be void, a good-faith transferee is typically entitled, to the extent value was given, to a lien on or a right in the transferred asset. Moreover, a defense exists for transfers made in the ordinary course of business, under certain conditions. Generally, a transfer is not deemed to be fraudulent against a person who took in good faith and for a reasonably equivalent value or against any subsequent transferee or obligee. Section nine plainly states the time limits in which claims under the Act must be commenced; claims under section four must be made within four years after the transfer was made or the obligation was incurred or, if later, within one year after the transfer or obligations was or could reasonably have been discovered by the claimant. Claims under section five must be made within one year after the transfer was made or the obligation incurred.
In these times of economic turmoil, it’s quite conceivable that you or your business may encounter a transfer reachable under the Act. Litigation concerning transfers and defenses under the Act can be highly technical and complex. Seek the advice of legal counsel in the earliest stages of any claim or defense under the Act.
Attorney Bill Amann works in the firm’s Bankruptcy Department and can be reached at 603.486.1530 or at email@example.com.
See Boston Trading Group v. Burnazos, 835 F.2d 1504, 1508 (1st Cir. 1987)) (interpreting Massachusetts law).
See In re Jackson, 318 B.R. 5 (2004) affirmed at 459 F.3d 117, C.A.1 (N.H.) 2006.
6/4/2022 01:01:36 pm
Nice Post. Thanks for sharing with us.
6/7/2022 10:00:52 am
Remedies can include the avoidance of transfers attachments against transferred assets injunctions prohibiting further transfers and in extreme cases, I truly appreciate your great post!
6/7/2022 10:21:15 am
Moreover a defense exists for transfers made in the ordinary course of business, under certain conditions. Thank you for making this such an awesome post!
9/28/2022 01:35:18 am
Please explain more about transfer..
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