On January 1, 2016, Kentucky joined a growing movement among states across the country to revise fraudulent transfer statutes. Kentucky accomplished this by repealing its statutes on fraudulent transfers and preferential transfers (KRS 378.010 et seq.), and replacing them with the Uniform Voidable Transactions Act (“UVTA”) (KRS 378A.005 et seq.). The UVTA was designed to replace the Uniform Fraudulent Transfer Act (“UFTA”) that was previously adopted by 43 other states (which did not include Kentucky). In Kentucky, the UVTA represents a significant update to the Commonwealth’s prior statute on fraudulent transfers which has its roots going back to 1855.
A fraudulent conveyance (or fraudulent transfer) is basically an attempt by a debtor to avoid creditors by transferring assets to another person or entity. A major initiative in adopting UVTA is to clarify that creditors are not required to establish “fraud” by clear and convincing evidence. Rather, creditors under UVTA only need to show by a preponderance of the evidence that an insolvent debtor received less than reasonably equivalent value in a transaction. Among other changes, the UVTA also expands a creditor’s available sources of recovery for voidable transactions, decreases the statute of limitations in which to file claims, and creates a statutory definition of insolvency for debtors.
While the enactment of UVTA repealed the Commonwealth’s fraudulent conveyance and preference statutes, these statutes are not completely inapplicable. If the subject transaction or transfer occurred prior to January 1, 2016, the statutes prior to UVTA will continue to apply. KRS 466.080(3) provides that “No statute shall be construed to be retroactive, unless expressly so declared.” The UVTA does not expressly state, or in any way reference, that it is intended to be applied retroactively. A creditor seeking to litigate claims in Kentucky regarding a debtor’s transfer of assets should be mindful of the UVTA’s significant changes to this area of the law.