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Michigan Legislature Considers Replacing Uniform Fraudulent Transfer Act with Uniform Voidable Transactions Act

The Michigan legislature, at the recommendation of the Uniform Law Commission, is considering replacing the Uniform Fraudulent Transfer Act with the Uniform Voidable Transactions Act. The proposed legislation would, according to the Senate Fiscal Agency, amend the Uniform Fraudulent Transfer Act to do the following: • Refer to transactions that can be avoided as “voidable” transactions, instead of “fraudulent” transactions. • Specify that a creditor making a claim for relief to avoid a transaction would have the burden of proving the elements of the claim by a preponderance of the evidence. • Provide that a claim for relief would be governed by the law of the jurisdiction where the debtor was located when the transfer was made, and prescribe rules for determining a debtor’s location. • Identify the party that would have the burden of proving certain matters, and establish a preponderance of the evidence standard. • Make an exception to a provision under which a transfer is not voidable if it results from the enforcement of a security interest under the Uniform Commercial Code. • Preclude the entry of a judgment against an immediate or mediate good-faith transferee of a good-faith transferee who took for value. • Specify that a debtor that was not paying debts as they became due other than as a result of a bona fide dispute would be presumed to be insolvent. • Delete a provision that specifies when a partnership is insolvent. • Specify that a series organization and each of its protected series would be considered a separate person for purposes of the Act. The bill also would rename the Act as the “Uniform Voidable Transactions Act”. The bill passed the in the Michigan Senate 37-0 on October 20, 2016, and was received in the Michigan House of Representatives on November 9, 2016, where it was referred to the House Judiciary Committee. If the bill becomes law, the sections it would amend or add would apply to a transfer made or obligation incurred on or after the bill’s effective date. Those sections would not apply retroactively, nor would they apply to a right of action that accrued before the bill’s effective dated.

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