Most of the arguments in a fraudulent transfer case come down to definitions. Whether the debtor was insolvent. Whether the transferee was an insider. Whether what changed hands counts as a transfer at all. TUFTA defines its key terms carefully. This page collects the ones that come up most often, with brief practitioner notes on how they actually operate in litigation.
Asset
Property the debtor owns. The definition is broad. Tangible property (real estate, vehicles, equipment, inventory) and intangible property (accounts receivable, contract rights, the name of a business, a phone number, an interest in a partnership) both qualify.
The exclusions are narrower than the inclusions. Property held in a way a creditor cannot reach, homestead property (which has its own treatment), and property held in tenancy by the entireties not subject to a creditor of one tenant. Outside those carve-outs, if it has value and the debtor owns it, it is an asset under TUFTA.
Transfer
Every mode of disposing of or parting with an asset, or an interest in an asset, direct or indirect, absolute or conditional, voluntary or involuntary.
This is broader than most readers expect. A sale is a transfer. A gift is a transfer. A payment is a transfer. The grant of a lien or security interest is a transfer. A lease is a transfer. The release of an interest is a transfer. Public filing of the transfer does not change what it is. The legal mechanism the debtor used to move the asset is irrelevant if the effect was to put the asset out of the creditor’s reach.
Claim
A right to payment or to property, whether reduced to judgment, liquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, or equitable. The drafters were comprehensive on purpose: TUFTA was written to cover every kind of right one person can have to be paid by another.
If somebody owes you money or owes you property, you have a claim for TUFTA purposes. You do not need a judgment. You do not need a fixed amount. You do not need the obligation to be due. There is more on this in the page called “Do You Have a Claim?”
Creditor
A person, including a spouse, a minor, or a ward, who has a claim.
TUFTA distinguishes between two kinds of creditors based on timing. A present creditor is one whose claim arose before the transfer. A future creditor is one whose claim arose within a reasonable time after the transfer. Present creditors have the broader remedies. Future creditors are limited in some applications of the statute but retain a real claim under the actual fraud theory when the facts support it. The page called “Do You Qualify as a Creditor?” walks through both.
Insider
The closest version of “person with a relationship to the debtor.” TUFTA defines insiders differently depending on whether the debtor is an individual, a corporation, or a partnership.
For an individual debtor: relatives, partnerships in which the debtor is a general partner, the general partners of those partnerships, and corporations the debtor controls.
For a corporate debtor: directors, officers, and persons in control of the corporation.
The list is not exhaustive. Courts can find that someone is an insider even if they do not fit one of the statutory categories exactly, by looking at the closeness of the relationship and the absence of arm’s-length dealing. A debtor’s brother-in-law running a business with him will almost certainly qualify even though in-laws are not always listed as relatives.
Insolvent
A debtor is insolvent when the sum of his debts is greater than the fair value of all his assets. That is the balance-sheet test, and it is the statutory definition. TUFTA adds a practical shortcut: a debtor who is generally not paying his debts as they become due is presumed to be insolvent. The presumption is rebuttable, but a debtor who is missing payments, dodging creditor calls, and shuffling obligations tends to have a hard time overcoming it.
The presumption is often the easier route to insolvency, since it turns on observable conduct rather than a full balance-sheet reconstruction. Whichever way insolvency is established, the calculation follows rules: the debtor’s assets do not include property already fraudulently transferred, and the debt total excludes valid liens on the counted assets.
Insolvency is the central element of the most common constructive fraud theory. Many debtors who look financially sound on a casual inspection turn out to have been insolvent once the calculation is done correctly.
Lien
A charge against or an interest in property to secure payment of a debt or performance of an obligation. TUFTA covers security interests created by agreement, judicial liens, common-law liens, and statutory liens. A “valid lien” is one that holds up against a later judicial lienholder.
The creation of a lien is itself a transfer under TUFTA. This is the rule that catches debtors who try to use lien grants to put insider creditors ahead of judgment creditors. The page on “Incurring Obligations” covers the most common fact patterns.
Person
Includes individuals, partnerships, corporations, associations, organizations, governments, governmental subdivisions or agencies, business trusts, estates, trusts, and any other legal or commercial entities. If it can own property or owe money, it is a person under TUFTA.
Reasonably Equivalent Value
The fair-value standard at the center of constructive fraud cases. The statute does not set a number. Courts look at the totality of the circumstances and ask whether the debtor received something close to fair market value in exchange for what he gave up.
Arm’s-length transactions between independent parties carry a presumption that the price reflects fair value. Insider transactions do not. The page called “Is the Value Fair?” goes through the analysis in more detail.
Value (For Insolvency Purposes)
Property that can be made available for the payment of debts. This is the figure that goes on the asset side of the insolvency calculation. It excludes property that has already been fraudulently transferred, property held subject to valid liens to the extent of those liens, and property otherwise unavailable to creditors.
TUFTA defines more terms than this page covers, and several of the definitions on this page have technical edges that this summary leaves alone for readability. A lawyer should look at how the definitions apply to the specific facts of your case before you act.
The Texas Fraudulent Transfer Statutes are complicated affairs. These pages are meant to explain the law in terms that are as simple as we can make them. Sometimes we have ignored limited exceptions and other quirks in the law so that the general concepts could be conveyed clearly. Your situation needs to be carefully analyzed. No two situations are identical and you need legal advice before making an important decision. Use this website as a guide only.