Section 56-10-19 - Transfer or obligation voidable as to present creditor

A. A transfer made or obligation incurred by a debtor is voidable as to a creditor whose claim arose before the transfer was made or the obligation was incurred if the debtor made the transfer or incurred the obligation without receiving a reasonably equivalent value in exchange for the transfer or obligation and the debtor was insolvent at that time or the debtor became insolvent as a result of the transfer or obligation. B. A transfer made by a debtor is voidable as to a creditor whose claim arose before the transfer was made if the transfer was made to an insider for an antecedent debt, the debtor was insolvent at that time and the insider had reasonable cause to believe that the debtor was insolvent. C. Subject to Subsection B of Section 56-10-16 NMSA 1978, a creditor making a claim for relief under Subsection A or B of this section has the burden of proving the elements of the claim for relief by a preponderance of the evidence. History: Laws 1989, ch. 382, § 6; 2015, ch. 54, § 14. ANNOTATIONSThe 2015 amendment, effective January 1, 2016, changed 'fraudulent' transfers to 'voidable' transfers, as used in the Voidable Transactions Act; in the catchline, changed 'Transfers

§ 14. ANNOTATIONSThe 2015 amendment, effective January 1, 2016, changed 'fraudulent' transfers to 'voidable' transfers, as used in the Voidable Transactions Act; in the catchline, changed 'Transfers fraudulent as to present creditors' to 'Transfer or obligation voidable as to present creditor'; in Subsection A, after 'debtor is', deleted 'fraudulent' and added 'voidable'; in Subsection B, after 'debtor is', deleted 'fraudulent' and added 'voidable'; and added Subsection C. Factors in determining voidable transfers. — The noninclusive enumeration of factors contained in 56-10-18 NMSA 1978 and this section are to be considered when determining whether the funds that ordinarily would be exempt from attachment under 42-10-2 and 42-10-3 NMSA 1978 should be set aside as the result of a voidable transfer. Dona Ana Sav. & Loan Ass'n v. Dofflemeyer, 1993-NMSC-031, 115 N.M. 590, 855 P.2d 1054. Trustee failed to meet burden of proving debtor's insolvency. — Where debtor, a corporation wholly owned by defendants, filed a Chapter 11 bankruptcy petition, which was later converted to a Chapter 7 bankruptcy petition, and where the Chapter 7 trustee filed a fraudulent transfer claim, seeking to

wned by defendants, filed a Chapter 11 bankruptcy petition, which was later converted to a Chapter 7 bankruptcy petition, and where the Chapter 7 trustee filed a fraudulent transfer claim, seeking to recover approximately $1,200,000 in transfers that debtor made to third parties as shareholder distributions, the bankruptcy court held that the trustee failed to satisfy its burden of showing that debtor was insolvent at the time of the alleged constructive fraudulent transfers and thus could not prevail on avoidance claims. In re Quick Cash, 620 B.R. 358 (Bankr. D. N.M. 2020).