Section 4-59-204 was changed from fraudulent transfers to voidable transfers or obligations regarding present or future creditors. The regulation has expanded default of the debtor from not only a mortgage, but now also includes a deed of trust or a security agreement. 4-59-203(a).The regulation states that reasonably equivalent value will be found if a person acquires an interest of the debtor in an asset from a regularly conducted foreclosure sale or an execution of a power of sale for the acquisition of interest of the debtor upon default. Under the regulation, value is given if the property is transferred, but the value does not include an underperformed promise made otherwise than in the ordinary course of the promisor’s business to furnish support to the debtor. The definitions section 4-59-201 was updated to include a definition for electronic, meaning “relating to technology having electrical, digital, magnetic, wireless, optical, electromagnetic, or similar capabilities.
Arkansas llc fraudulent conveyance code#
House Bill 2139: Fraudulent Transfers and Voidable TransactionsĪrkansas Code Title 4, Chapter 59, Subchapter 2, previously known as “Fraudulent Transfers” was amended to read “Uniform Voidable Transactions Act.” These provisions are effective on Augor 91 days after adjournment of the current legislative session. However, the bankruptcy decision, and cases cited therein, suggests that a creditor can overturn a debtor’s transfer of non-exempt money to an LLC/partnership as a fraudulent transfer if the facts otherwise show intent to defraud creditors regardless of the debtor’s receipt of valuable LLC/partnership interests.Arkansas modified its regulations regarding fraudulent transfers and voidable transactions. The court reversed the loan repayment as a fraudulent transfer.Īll fraudulent transfer analysis depend upon the unique facts of the particular case. The court said that although the debtor received value from repaying the loan the receipt of value does not exonerate the transfer from fraudulent transfers, and the court said that a number of courts have found fraudulent transfers despite the debtor’s receipt of value. The debtor argued that he received value for repayment of the life insurance loan because repayment was required to maintain a death benefit. The trustee argued that the repayment was a fraudulent transfer. The debtor used non-exempt cash to repay a loan from the debtor’s cash value life insurance policy. The issue was examined in a 2007 bankruptcy case. In my opinion, the argument that a debtor receives LLC/partnership of interest of reasonably equivalent value does not hide or excuse the debtor’s intent to avoid collection by transferring title to the non-exempt assets. But, many debtor’s facing legal problems transfer non-exempt assets to LLCs or partnerships because it is harder for creditors to attack the assets owned by the LLC/partnership than it is to execute on the same assets in the debtor’s name. Some reasons have nothing to do with asset protection such as capitalizing a new business venture.
People transfer non-exempt assets to LLCs or partnerships for a variety of reasons. A creditor would be left with only a charging lien against the LLC or partnership interest even thought the creditor could have levied or foreclosed the non-exempt asset when it was titled in the debtor’s name.
If one accepts this argument, then it would be very difficult for a creditor to reverse almost any transfer from a debtor to the same debtor’s multi-member LLC or partnership because the debtor will show that he received an asset (the interest) comparable in value to the asset he transferred out of his own name. The LLC/partnership interest is a fair trade for the assets conveyed. They contend that a debtor’s transfers to an LLC or partnership is not a fraudulent transfer when the debtor receives LLC or partnership interest in exchange for the conveyances to the LLC or partnership. Some people have suggested to me that a debtor’s receipt of fair value defense applies to a debtor’s transfer of non-exempt money or property from the debtor’s name to an LLC or partnership owned by the debtor. If a debtor transfers title to a person or entity and receives nothing in return the transfer is susceptible to fraudulent transfer allegation, but if the debtor receives consideration reasonable equivalent value the transfer appears more as a “fair trade” rather than an attempt to evade a creditor. One of most important indicators of a fraudulent transfer is the receipt of value as consideration for the transfer.
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