![]() ![]() The reality is that conveyances for substantially less than fair consideration often occur because the person making the conveyance intends that the conveyance will thwart creditors. Billionaire still has $100 billion or so in loose change against which Jane Smith can collect the $10k he owes her. So if Bill Billionaire owes Jane Smith $10,000, and Bill Billionaire deeds a $500,000 property to a family member for $1, Mr. What about that part of NYDCL §273 that requires the debtor to be rendered insolvent as a result of the conveyance? NYDCL §271 explains that “ person is insolvent when the present fair salable value of his assets is less than the amount that will be required to pay his probable liability on his existing debts as they become absolute and matured.” This definition makes sense because, if the person has assets that are greater than the person’s debts, the debtor possesses assets against which the creditor can collect the amount owed. If real estate that is assessed at $500,000 is deeded to a family member for $1, or if a truck with a blue book value of $30,000 is sold for $1,000, the transaction is not for fair consideration. Fair market value is mostly an objective standard, whether real estate, hard goods, or intellectual property. In short, if the conveyance is for significantly less than fair-market value, the conveyance is not for fair consideration. The NYDCL says fair consideration is given for property or obligation when a) in exchange for the property or obligation as a fair equivalent for it, and in good faith, property is conveyed or an antecedent debt is satisfied or b) the property or obligation is received in good faith to secure a present advance or antecedent debt in an amount not disproportionately small compared with the value of the property or obligation obtained. “Every conveyance made and every obligation incurred by a person who is or will be thereby rendered insolvent is fraudulent as to creditors without regard to his actual intent if the conveyance is made or the obligation is incurred without a fair consideration.” NYDCL § 273. Conveyances that are not for fair consideration are presumptively fraudulent-it is not necessary to prove an intent to defraud the creditor-when the conveyance is for less than fair consideration. Under the NYDCL, there is intentional fraud and also presumptive fraud. The NYDCL provides that a “fraudulent conveyance” by the debtor can be reached by the creditor, meaning the creditor can “disregard the conveyance and attach or levy execution upon the property conveyed.” NYDCL §278 (1)(a).Ī conveyance is defined as “includ every payment of money, assignment, release, transfer, lease, mortgage or pledge of tangible or intangible property, and also the creation of any lien or incumbrance.” NYDCL §270. Unfortunately, the principal has transferred his or her assets to a family member.īut you may still be able to collect the debt because of the New York State Debtor-Creditor Law (NYDCL). So you sue the buyer’s principal on the personal guarantee. Your buyer has no assets when you try to collect. The buyer fails to pay and has already sold your product to a third party. Has this happened to you? You sell a product to a company in New York State whose principal personally guarantees payment. White Collar & Government Investigations.Restructuring, Bankruptcy & Creditors' Rights.
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