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Hello, I am a lawyer from Poland and I need an answer re: fraudulent conveyance claim (actio pauliana) in foreign jurisdiction for my PhD. I learnt that this institution looks quite similar, as in Poland but I cannot find a response to one querry. I will try to briefly explain what is the issue. In Poland when my debtor solds his property acting fraudlently to some third party, I can bring a court case against this third party (who should I sue in USA - the third party, the debtor, or both of them) and if I win the case I can go to the bailif and start the compulsory enforcement against the debtor but from the property that was sold to this third party. The querry is, what if the third party that benefited from the legal action made by my debtor is declared a bankrupt? Can I sue it as a bankrupt? Or can I go to its bankruptcy before I have a court award against the banckrupt. I need a brief advice if its directly regulated or is also problematic in you jurisdiction and I need numbers of acticles and names of legal acts that concerns this issue, some awards of the Suppreme Court or articles that I can find in the Internet. kind regards Natalia
I was with you until: I need numbers of articles and names of legal acts that concerns this issue, some awards of the Supreme Court or articles that I can find in the Internet.
There are 50 states in the U.S. and each one has FC laws. There is also Federal Laws under the Bankruptcy Code. Generally though, your question is fairly easy to Answer generally.
Ok, I though this is only a subject of Federal Laws. In such case, I will need a general response on how it works at the federal level and the basic details of the Federal Law acts that concerns this subject (name, basic articles concering this issue), something that give me a start for my research. Maybe if you can show me an exapmple of state FC regulations (for instance, detailes of FC laws in Washington DC?). Is there any Internet access to the content of these Acts. I am visiting NY in April, so I will be gratfull for a clue where to obtain more information (public libary, some special libaries for lawyers?).
Hello Natalia: I think I can help. I have been involved in a few FC cases over the years, both state and federal. You asked:
I can bring a court case against this third party (who should I sue in USA - the third party, the debtor, or both of them)
Both of them, but the third party is the primary defendant because s/he has possession or title to the property that you are trying to recover.
if I win the case I can go to the bailif and start the compulsory enforcement against the debtor but from the property that was sold to this third party.
Our bailiffs do not perform such functions. When the judgment is entered reverting title to the debtor, it depends on the nature of the property, i.e. real estate or personal property, how the creditor would actually seize it in satisfaction of the debt.
what if the third party that benefited from the legal action made by my debtor is declared a bankrupt? Can I sue it as a bankrupt? Or can I go to its bankruptcy before I have a court award against the bankrupt
It is usually the debtor who files for bankruptcy, in which case Section 548 of the Federal Bankruptcy Code would apply. See: http://www.law.cornell.edu/uscode/text/11/548
If the transferee of the property files for bankruptcy, then you would still file suit/or petition in his bankruptcy proceeding to recover the property so that it cannot be used to pay his other creditors.
If either party is in bankruptcy then the bankruptcy law controls. If there is no bankruptcy involved then the laws of the state where the transfer of the property is applied. Many states have adopted The Uniform Fraudulent Transfer Act (UFTA), or variations of it as their law. It is important to know which state law is being applied. For a scholarly law journal article on UFTA see: http://scholarship.law.wm.edu/cgi/viewcontent.cgi?article=1321&context=facpubs&sei-redir=1 For a good general summary of the law, see: http://uniformlaws.org/ActSummary.aspx?title=Fraudulent%20Transfer%20Act
There is a huge amount of information about Fraudulent Transfers/Conveyances on line. I hope this is sufficient to get you started in the right direction and that you will give me a positive rating. If you have any follow up questions please send a Reply.
Thanks for using Pearl.com - Just Answer.
Thank you, XXXXX XXXXX already quite helpful. I checked Wikipedia and the bankruptcy law provision that I found in the Internet but all information concerns the most common situation when the debtor becomes a bankrupt, which is not my case.
Nevertheless, I still have some follow up questions. Let's assume that the debtor in not a bankrupt, only the third party (transferee) becomes a bankrupt.
1. Concerning the part you wrote:
"If the transferee of the property files for bankruptcy, then you would still file suit/or petition in his bankruptcy proceeding to recover the property so that it cannot be used to pay his other creditors."
by "suite/or petition in his bankruptcy" you mean that it is always the bankruptcy court (or other bankruptcy officer?) who decides on the fraudulent conveyance, or it can be other common court, that would be competent to review the case if the transferee was not a bankrupt?
2. by "recover the property" you mean that the ownership title to the property returns to the debtor, so that I can seize it as a creditor? In Poland the effect of the award in fraudulent conveyance claim is that the property of the debtor is deemed as it was never transfer and I can seize it as the debtor's property, but the effect of such award is only between the involved parties: the debtor, the creditor and the transferee. In other words, the legal action made by the debtor and the third party (usually some transfer of property) is still legally binding but is ineffective vis-a-vis a creditor. Is it somehow similar in USA?
3. "it depends on the nature of the property, i.e. real estate or personal property, how the creditor would actually seize it in satisfaction of the debt". Wher can I find more info on this?
By "suite/or petition in his bankruptcy" you mean that it is always the bankruptcy court (or other bankruptcy officer?) who decides on the fraudulent conveyance, or it can be other common court, that would be competent to review the case if the transferee was not a bankrupt?
This is a little complicated. You can sue the transferee in state court under the UFTA (assuming that state uses it) and state court will have jurisdiction. If the transferee files bankruptcy while the suit is pending, the suit is automatically stayed by bankruptcy law BCode 362(a). Then the b/k court takes jurisdiction over the property to decide who has a right to it. The B/K court can have the case moved from state court to b/k court and tried there, APPLYING STATE LAW not federal bankruptcy law, because the debtor is only the transferee of the property and it has to be determined what right, if any he and his creditors has in that property. If it was the debtor who had transferred the property, then section 568 of the B/K code would control. OR, the bankruptcy trustee could decide that there is not enough money involved, or the debtor's estate has little or no chance of winning and retaining the property and he elects to abandon the property from the b/k proceeding, lift the stay and permit the state court case to proceed. Also, the transferee who bought the property in good faith is usually entitled to the return of his money. As I said, it gets complicated. Re: Question No. 2 - The court would fashion a judgment voiding the transfer to the third party and re-vesting title in the debtor. The transfer cannot be found to be "legally valid" at the same time. The creditor would be able to proceed with judgment execution against the property. Re: Question No. 3 - The creditor would follow normal collection procedures which when you know what property the debtor has, would be an execution sale. It could be of real estate or a car or other goods. When the judgment has been entered the creditor can direct the sheriff of the court to seize and sell property of the defendant to satisfy the judgment. This is an execution sale which differs from a judicial sale.
An execution sale is made by an officer of the law pursuant to power conferred by statute and by the writ, whereas a judicial sale is made by the court or by a direct agent of the court. Sale on general execution is a statutory method of enforcing payment of a personal judgment for money out of any nonexempt property of the debtor, while a judicial sale is based upon an order for the sale of specific property.
I would appreciate your positive rating at this point. I will be happy to continue assisting you with whatever you need on this subject. THANK YOU FOR USING PEARL.COM AND JUST ANSWER.
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