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New Jersey Law That Protects Creditors’ Rights

Creditors in New Jersey should not be dissuaded from trying to collect what is owed to them because debtors transfer their assets. New Jersey law protects creditors’ rights by imposing penalties for debtors who transfer assets to prevent collection of a valid debt.

The Fraudulent Conveyance Act of 1919 has protected creditors’ rights in New Jersey for nearly a century. However, in 1988 the New Jersey Legislature updated New Jersey’s fraudulent transfer laws by passing the Uniform Fraudulent Transfer Act (“UFTA”), which replaced the former Fraudulent Conveyance Act.

The purpose of UFTA is to protect creditors from debtors who hide assets. Debtors are therefore prohibited from transferring assets to avoid paying debts, once creditors have a “right to payment.”

Under New Jersey’s UFTA, there are two ways creditors can establish that a fraudulent transaction has occurred. Creditors can prove that a transaction was done with actual intent to defraud the creditor. However, the burden of proof is on the creditor and it is often very difficult to meet. Therefore, the UFTA also allows creditors to prove “constructive fraud.” To prove this, creditors must show that a transfer was made without exchange of reasonably equivalent value, rendering a debtor insolvent.

Proving insolvency often hinges on the ability to establish a debtors’ financial condition at particular points in time. Therefore, an experienced accountant would need to be hired to review all the debtors’ books and records. However, before experts get involved you need an experienced attorney to obtain all the necessary documents that an accountant would need. Our experienced New Jersey attorneys regularly work hand-in-hand with experts to help prosecute creditors’ claims.

Creditors who successfully prove a violation of the UFTA are provided a wide array of remedies. The primary remedy is to set aside the fraudulent transfer. This allows the creditor to obtain payment.

Other remedies include injunctions preventing a transfer or the appointment of a receiver who can manage the debtor or its assets to ensure that creditors are paid. Courts are empowered to provide for any other relief which is just under the circumstances of a particular case.

Establishing fraud under the UFTA is not always easy to do. It is therefore important to speak with an experienced New Jersey commercial litigation attorney to ensure that your claims are properly prosecuted. Our experienced attorneys can help locate evidence by, for example, obtaining bank records or obtaining other documents related to the transaction which can help protect your rights.

If you are trying to collect debts, our New Jersey business attorneys can help. McLaughlin & Nardi’s attorneys regularly represent both individuals and businesses collecting debts while protecting creditors’ rights. Our New Jersey attorneys have extensive experience representing creditors of all sizes in all aspects of litigation. To learn more about what we can do to help, please email us or call one of our lawyers at (973) 890-0004.