Minnesota’s Fraudulent Transfer Act (MUFTA) aims to prevent debtors from unfairly hiding assets from creditors. It applies to transfers made with the intent to defraud, hinder, or delay creditors, as well as transfers made for less than fair value while the debtor is insolvent or becomes insolvent as a result.
Here’s a breakdown:
Key Points of MUFTA
- Intent to Defraud: A transfer is fraudulent if made with the intent to prevent creditors from accessing assets. “Badges of fraud” may indicate intent, such as transferring assets to family members, hiding assets, or selling them for significantly less than their value.
- Transfers for Less Than Fair Value: Even without intent to defraud, a transfer can be fraudulent if the debtor doesn’t receive reasonably equivalent value in return and is insolvent or becomes insolvent due to the transfer.
- Insolvency: A debtor is considered insolvent if their debts are greater than their assets or if they cannot pay debts as they become due.
- Look-Back Period: Creditors can challenge transfers made up to six years before the claim arose.
- Remedies: If a transfer is deemed fraudulent, a creditor can seek to void the transfer, obtain a judgment against the recipient of the transferred asset, or other remedies to recover the value of the asset.
Who is Affected?
MUFTA can affect debtors, creditors, and anyone who receives transferred assets. It’s particularly relevant in situations like:
- Debt collection: Creditors can use MUFTA to recover assets transferred by a debtor.
- Bankruptcy: Bankruptcy trustees can use MUFTA to recover assets for the benefit of creditors.
- Business transactions: MUFTA can apply to transfers made by businesses, including those involving insiders (e.g., officers, directors, or related companies).
Important Note: MUFTA is complex, and determining whether a transfer is fraudulent depends on the specific facts of each case. Consulting with an attorney is crucial if you have questions about MUFTA.
Where to find the law: The Minnesota Fraudulent Transfer Act is codified in Minnesota Statutes Chapter 513. You can find the relevant statutes here: https://www.revisor.mn.gov/statutes/cite/513