When a business dispute involves unpaid debts or pending litigation, some individuals attempt to move valuable assets out of reach before a creditor can collect. These transactions are commonly referred to as fraudulent transfers or, under modern statutes, voidable transfers. Kentucky law provides legal remedies to challenge certain transfers that improperly place assets beyond the reach of legitimate creditors.
Not every transfer of property is improper. Businesses and individuals buy, sell and transfer assets every day for legitimate reasons. Problems arise when a transfer is made with the intent to hinder, delay or defraud creditors, or when assets are transferred for less than reasonably equivalent value under circumstances recognized by law. Determining whether a transfer is voidable requires a careful review of the facts surrounding the transaction at issue.
The law in Kentucky
Kentucky has adopted the Kentucky Uniform Voidable Transactions Act, sometimes referred to as Kentucky’s voidable transfer statute. This law allows courts to examine transfers that may have been made to shield assets from creditors improperly. Because direct evidence of intent is not always available, courts may consider various surrounding circumstances, often called “badges of fraud,” when evaluating whether a transfer should be set aside.
Examples may include transferring property to a family member or closely related business, retaining control of assets after the transfer, moving property shortly before or after a lawsuit is filed, or receiving substantially less than fair market value in exchange for valuable assets. While none of these facts alone automatically establishes wrongdoing, they may warrant closer scrutiny.
Business litigation involving alleged voidable transfers frequently requires prompt action. Available remedies may include avoiding the transfer, attaching transferred assets or obtaining other court orders designed to protect creditors’ rights. The appropriate remedy depends on the specific facts of one’s case and the applicable law.