Moving money after you are sued creates a second case.

Transferring assets after a lawsuit begins can turn one case into two. New York’s Uniform Voidable Transactions Act lets the plaintiff sue to unwind the transfer and name a new defendant: whoever received the money. Debtor and Creditor Law sections 270 through 281 supply the theories, the remedies, and the deadlines that govern that second case.

The instinct is understandable. A complaint arrives. You look at the operating account, the building, the equipment, the affiliate’s shares. You start thinking about what should sit somewhere safer.

Act on it and you may hand the plaintiff a claim it did not have when it sued you. The first case is about the contract or the tort. The second is about the transfer, and it turns on documents you created: a deed, a wire confirmation, a check to a relative.

It also has a defendant with nothing to do with the dispute. Your spouse. Your brother’s LLC. Your holding company. That person needs counsel too.

What law governs transfers made after you are sued in New York?

New York’s Uniform Voidable Transactions Act governs transfers made on or after April 4, 2020. The act is codified at Debtor and Creditor Law sections 270 through 281 and replaced the Uniform Fraudulent Conveyance Act that New York had used since 1925. Transfers made before that date are still judged under the older statute.

Law: N.Y. Debtor and Creditor Law 270 to 281, effective April 4, 2020.

One repeal matters here. Former section 273-a voided a conveyance made without fair consideration by a defendant in a money damages action, regardless of intent, if the judgment went unsatisfied. It was repealed on April 4, 2020 with no counterpart. The attack now runs through sections 273 and 274.

Law: former N.Y. Debtor and Creditor Law 273-a, repealed April 4, 2020.

“Transfer” is broad: every mode, direct or indirect, voluntary or involuntary, of parting with an asset, including payment of money, release, lease, license, and creation of a lien. Granting your cousin a mortgage is a transfer. So is paying yourself.

“Asset” is narrower than “property,” and that is where a defense often lives. Section 270 excludes property to the extent it is encumbered by a valid lien, property generally exempt under non-bankruptcy law, and a tenancy by the entirety interest a creditor of one spouse cannot reach. Section 279 keys the governing law to the debtor’s location when the transfer was made.

Law: N.Y. Debtor and Creditor Law 270 and 279.

Does moving money after a lawsuit count as actual intent to defraud?

Moving money after a lawsuit is filed does not by itself prove intent, but the timing is one of the listed factors. Debtor and Creditor Law 273(a)(1) makes a transfer voidable if the debtor made it with actual intent to hinder, delay or defraud any creditor. Section 273(b) lists eleven factors a court may weigh.

The statute says they may be considered “among other factors,” so the list is a floor. A court may weigh whether:

• the transfer was to an insider;
• the debtor kept possession or control afterward;
• the transfer was disclosed or concealed;
• the debtor had been sued or threatened with suit before it;
• it was of substantially all the debtor’s assets;
• the debtor absconded;
• the debtor removed or concealed assets;
• the value received was reasonably equivalent;
• the debtor was or became insolvent;
• it came shortly before or after a substantial debt was incurred;
• essential business assets went to a lienor that passed them to an insider.

Law: N.Y. Debtor and Creditor Law 273(a)(1) and 273(b).

Read factor four again. Having been sued or threatened with suit before the transfer is a statutory badge of intent. The March demand letter is evidence about the April transfer.

Now stack the others. A payment to your spouse is factor one. Driving the car titled to the new LLC is factor two. Not recording the deed is factor three. The badges are evidence, not elements, so no number of them proves intent automatically. Four of them, dated after a complaint, is still a case built out of your own paperwork.

I read the transfer date against the date of the first demand letter before I read anything else in the file.

The burden on a section 273(a) claim is a preponderance of the evidence. Section 274(c) sets the same standard for section 274 claims, subject to the insolvency presumption.

Law: N.Y. Debtor and Creditor Law 273(c), 274(c) and 271(b).

That is lower than the clear and convincing proof required for intent-based conveyance claims under the former article, which still governs pre-April 2020 transfers.

Law: Marine Midland Bank v. Murkoff, 120 A.D.2d 122, 126 (2d Dep’t 1986), appeal dismissed, 69 N.Y.2d 875 (1987).

The statute never asks whether you felt dishonest. It asks what the transfer looked like, to whom, and when.

Can a transfer be voided even if you had no bad intent?

A transfer can be voided in New York with no proof of intent at all. Debtor and Creditor Law 273(a)(2) and 274(a) create constructive claims. Each turns on value rather than motive: a transfer made without receiving reasonably equivalent value, combined with insolvency or with remaining assets unreasonably small for the business.

Section 274(a) is the cleanest version. A transfer is voidable as to a creditor whose claim arose before it if the debtor got no reasonably equivalent value and was insolvent then or became insolvent as a result.

Section 273(a)(2) reaches present and future creditors alike. It applies where reasonably equivalent value was missing and the debtor was in or entering a business with unreasonably small assets, or should have believed it would incur unpayable debts.

Law: N.Y. Debtor and Creditor Law 273(a)(2) and 274(a).

Insolvency is defined. A debtor is insolvent if, at a fair valuation, its debts exceed its assets. A debtor generally not paying debts as they come due, other than because of a bona fide dispute, is presumed insolvent, and the party that presumption runs against must show solvency is more probable.

Law: N.Y. Debtor and Creditor Law 271.

That presumption is the trap in a distressed business. You slow-pay three vendors. You gift an asset to a family trust. You have supplied the elements without intending harm. Intent is not part of the proof. Fair valuation is, and so are reasonably equivalent value, the section 277 defenses and the section 278 deadline. Voidable is not void: the transfer stands until a creditor sues and a court orders relief.

Is repaying a loan from your spouse or your own company safe?

Repaying a loan from a spouse, a parent, or an affiliated company is the transaction New York singles out. Debtor and Creditor Law 274(b) makes a transfer to an insider on an antecedent debt voidable as to an earlier creditor if the debtor was insolvent then and the insider had reasonable cause to believe it.

Law: N.Y. Debtor and Creditor Law 274(b).

Notice what is missing. No bad intent. No lack of value, because satisfying a real debt is value under section 272. The claim turns on who was paid, when, and what that person had reason to know.

Notice also what the statute gives back. Section 277(f) defeats a 274(b) claim to the extent the insider gave new value after the transfer, where the transfer was made in the ordinary course of the business or financial affairs of the debtor and the insider, or where it was made in a good-faith effort to rehabilitate the debtor. A documented insider note paid on schedule for years is an ordinary course argument. A lump sum paid the week after service is not.

Law: N.Y. Debtor and Creditor Law 277(f).

“Insider” is defined. It reaches relatives, affiliated entities and persons in control of the debtor, and “relative” runs to consanguinity within the third degree, a spouse, and a spouse’s relations within that degree.

Law: N.Y. Debtor and Creditor Law 270.

The consequence is blunt. When money is tight and a lawsuit is pending, paying the outside vendor is defensible and paying yourself back is exposed. The insider’s reasonable cause to believe stays the plaintiff’s burden, but it is measured objectively.

What can the plaintiff get, and what protects the person who was paid?

Remedies under Debtor and Creditor Law 276 reach both the asset and the person holding it. Subject to the limits in section 277, a creditor may seek avoidance to the extent necessary to satisfy the claim, attachment of the transferred asset, an injunction against further disposition, a receiver, and any other relief the circumstances require.

None of it is automatic. Attachment is available only if applicable law allows it. The injunction, the receiver and the catch-all are subject to principles of equity and the rules of civil procedure. Execution on the asset comes only after judgment, and only if the court so orders.

Law: N.Y. Debtor and Creditor Law 276(a) and 276(b).

Avoidance is not the only exposure. Where a transfer is avoidable under section 276(a)(1), the creditor may recover a money judgment for the value of the asset, as adjusted under section 277(c), or the amount needed to satisfy the claim, whichever is less, against the first transferee or the person for whose benefit the transfer was made, even if the asset is long gone.

Law: N.Y. Debtor and Creditor Law 277(b).

The defenses run the other way. Section 277(a) protects a person that took in good faith and for a reasonably equivalent value given the debtor, and the party invoking it carries the burden. It answers the actual intent claim only. On the constructive claims, the missing value is the creditor’s own element to prove.

Law: N.Y. Debtor and Creditor Law 277(a) and 277(g).

Partial value still counts. Where a transfer is avoided, a good faith transferee is entitled, to the extent of the value it gave, to a lien on or the right to retain the asset, or a reduction in the judgment.

Law: N.Y. Debtor and Creditor Law 277(d).

Value is documentary: an appraisal, a closing statement, a wire from the transferee’s own account. Good faith is harder to rebuild later. A transferee who knew about the lawsuit and knew the price was light is not a good faith purchaser.

Fee exposure also narrowed. Section 276-a now fixes the creditor’s reasonable attorney’s fees only where that creditor was awarded, or waived, fees available by court order, by agreement, or under the statute the claim arose from. Any fee judgment against a transferee is subject to the section 277 protections.

Law: N.Y. Debtor and Creditor Law 276-a.

How long does a creditor have to bring a voidable transfer claim?

Deadlines under Debtor and Creditor Law 278 depend on the theory pleaded. An actual intent claim under 273(a)(1) is extinguished unless brought within four years after the transfer, or if later, within one year after the transfer was or could reasonably have been discovered by the claimant. The constructive and insider claims run on their own clocks.

Law: N.Y. Debtor and Creditor Law 278.

The discovery extension attaches only to the intent claim. Concealment is a listed badge, and a transfer nobody could see does not start a clock. These periods govern transfers made on or after April 4, 2020. Earlier transfers fall under the former article, which reached back six years.

What should you do before you move any money?

The first step after being sued in New York is to freeze your decision making about assets, not the assets themselves. Ordinary operations continue on their normal cycle. Extraordinary transfers stop until counsel has reviewed the balance sheet, the timing, and every proposed recipient.

I ask for the bank statements and the check register before I ask anyone to explain what a transfer was for.

• Keep paying trade creditors, payroll, rent, and taxes on schedule. Stopping can trigger the insolvency presumption in section 271(b).
• Stop every insider transfer until it is reviewed: loan repayments, distributions, management fees, sweeps.
• Do not retitle real property, vehicles, or entity interests. Do not grant a mortgage or security interest to a relative or affiliate.
• Pull a balance sheet at fair valuation, not book value. Solvency at the moment of transfer is the pivot in sections 273(a)(2), 274(a) and 274(b).
• Write down the dates: the demand letter, service, and every significant transfer in the last six years.
• Document value on anything sold. The section 277 protections are built out of appraisals and quotes.
• Tell counsel about transfers already made. The one counsel learns about from motion papers cannot be managed.

The underlying case may be defensible. What is rarely defensible is a deed dated eleven days after service, running to a relative, for consideration of one dollar, with you still holding the keys.

Defend the first case. Do not build the second one.