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Fraudulent Transfer Act Prevents Hiding Assets from Creditors

By: Thomas W. Hartmann
The Hartmann Law Firm LLC; 908-731-6976
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In the recent case of Anastasi v. Barmbatsis, App. Div. (August 2015) the New Jersey Court of Appeals reconfirmed that one cannot simply transfer assets to a family member, incur debt or liability to a third party and then renege on the liability. In this case, Mr. Barmbatsis transferred substantially all his assets to his wife, then borrowed money from Anastasi, and would not pay. Mr. Barmbatsis even transferred the borrowed money to his wife in a joint account, and Mrs. Barmbatsis then spent it on another investment.

Anastasi sued and obtained a default judgment and then learned about the asset transfers. He sued under the Uniform Fraudulent Transfer Act (the "UFTA"), claiming the transfer of assets from husband to wife was fraudulent. The courts agreed.

The appellate court noted that the purpose of the UFTA "is to prevent a debtor from placing his or her property beyond a creditor's reach." Claims brought pursuant to the UFTA "allow the creditor to undo the wrongful transaction so as to bring the property within the ambit of collection."

In reviewing these matters, courts first assess whether the person making the conveyance "has put some asset beyond the reach of creditors" and whether the person "transferred property with an intent to defraud, delay, or hinder the creditor." To determine intent, courts can look at various facts such as whether the transfer was to an insider or family member, whether the transferor retained control, whether the transfer involved substantially all of the transferor's assets, the timing of the transfer, whether the transferor is paying his debts, and whether the transfer was concealed, among others.

The key is that the UFTA is designed to prevent someone from incurring a debt and then trying to avoid paying that debt by transferring away assets that could have been used to pay the valid debt.

The Hartmann Law Firm LLC can assist in these matters to insure your business and your assets are protected. Beyond this, we can help guide businesses through issues ahead of litigation or aggressively advocate in litigation and business disp utes should the need arise.

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