What Are The Elements Of A New Jersey Fraudulent Transfer Act Claim?

The New Jersey Uniform Fraudulent Transfer Act, N.J.S.A. §§ 25:2-20 – 25:2-34 (the “NJUFTA”) separately defines (i) transfers which are fraudulent as to both present and future creditors and (ii) transfers which are fraudulent as to present creditors only.

Specifically, under the New Jersey Uniform Fraudulent Transfer Act, a transfer made or obligation incurred by a debtor is fraudulent as to a creditor, whether the creditor’s claim arose before or after the transfer was made or the obligation was incurred (that is, as to either a present creditor or a future creditor), if the debtor made the transfer or incurred the obligation:

(i) with actual intent to hinder, delay, or defraud any creditor of the debtor, or

(ii) without receiving a reasonably equivalent value in exchange for the transfer or obligation, and the debtor:

(a) 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

(b) 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 become due.

N.J.S.A. § 25:2-25; see also Gilchinsky v. National Westminster Bank N.J., 732 A.2d 482, 488, 159 N.J. 463 (N.J. 1999).

Under the NJUFTA, a transfer made or obligation incurred by a debtor is fraudulent as to a creditor whose claim arose before the transfer was made or the obligation was incurred — that is, as to a present creditor only — 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.  N.J.S.A. § 25:2-27(a).

So, too, under the NJUFTA, a transfer made by a debtor is fraudulent as to a creditor whose claim arose before the transfer was made — that is, as to a present creditor only –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.  N.J.S.A. § 25:2-27(b).

In an action for relief against a fraudulent transfer or obligation, a creditor, subject to certain defenses, may obtain: (i) avoidance of the transfer or obligation to the extent necessary to satisfy the creditor’s claim; (ii) an attachment or other provisional remedy against the asset transferred or other property of the transferee; (iii) (a) an injunction against further disposition by the debtor or transferee, or both, of the asset transferred or of other property, (b) appointment of a receiver to take charge of the asset transferred or of other property of the transferee, or (c) any other relief the circumstances may require.  N.J.S.A. § 25:2-29; see also N.J.S.A. §§ 2A:26-1 – 2A:26-16; N.J. Ct. R. 4:60-1 – 4:60-19.

If your company wants to bring, or needs a lawyer to defend it in, business litigation and you are located in the New Jersey area, call Attorney David S. Rich at (347) 941-0760.