Law:Title 3. Insolvency, Fraudulent Transfers, And Fraud (Texas)

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Contents

Chapter 23. Assignments For The Benefit Of Creditors

Subchapter A. General Provisions

Section  23.01.  Definitions.

In this chapter, unless the context requires a different definition,

(1)  "assigned estate" means all the real and personal estate of an assigning debtor passing to the consenting creditors under an assignment by virtue of Section 23.02 or 23.09(b) of this code;

(2)  "assignee" means an assignee for the benefit of creditors;

(3)  "assigning debtor" means a person executing an assignment;

(4)  "assignment" means a general assignment for the benefit of creditors made under this chapter;

(5)  "consenting creditor" means a creditor who has consented to an assignment in one of the ways provided by Section 23.30 of this code; and

(6)  "real and personal estate" does not include property exempt by law from execution.

Acts 1967, 60th Leg., p. 2343, ch. 785, Sec. 1.



Section  23.02.  Nature And Effect Of Assignment.

(a) A debtor may assign his real and personal estate under this chapter to an assignee for the benefit of the debtor's creditors.

(b)  An assigning debtor shall provide in the assignment for distribution of all his real and personal estate to each consenting creditor in proportion to each consenting creditor's claim.

(c)  Regardless of an expression to the contrary, an assignment passes all an assigning debtor's real and personal estate to each consenting creditor in proportion to each consenting creditor's claim.

Acts 1967, 60th Leg., p. 2343, ch. 785, Sec. 1.



Subchapter B. The Assignment

Section  23.08.  Form And Content Of Assignment.

(a) For an assignment to be valid,

(1)  the assigning debtor must make the assignment in writing; and

(2)  it must be proved or acknowledged and recorded in the manner provided by law for the conveyance of real estate.

(b)  The assigning debtor shall attach to his assignment an inventory containing the following information:

(1)  a list naming each creditor of the assigning debtor;

(2)  the resident address, if known, of each creditor;

(3)  the amount owed each creditor and the type of debt;

(4)  the consideration for the debt and the place where the debt arose;

(5)  a description of each existing judgment or security for the payment of the debt;

(6)  a schedule of all the assigning debtor's real and personal estate at the date of the assignment;

(7)  a description of

(A)  each encumbrance on the real and personal estate; and

(B)  each voucher and security relating to the estate; and

(8)  the value of the estate.

(c)  The assigning debtor shall sign the inventory required by Subsection (b) of this section and swear that it is just and true.

Acts 1967, 60th Leg., p. 2343, ch. 785, Sec. 1.



Section  23.09.  Fraud Does Not Defeat Assignment.

(a) An assignment is not affected and a consenting creditor is not deprived of his proportionate share of the assigned estate by the fraudulent act or intent of the assigning debtor or assignee. A consenting creditor is a proper party to a suit filed to enforce a right under an assignment, or to protect an interest in an assigned estate.

(b)  Except as to an innocent purchaser for value, a transfer of property made in contemplation of an assignment with an intent to defeat, delay, defraud, or give preference to a creditor is void and the property passes under the assignment rather than by the transfer.

(c)  An assignee may sue to recover property transferred with an intent described in Subsection (b) of this section, and when the property is recovered, the assignee shall apply it for the benefit of the assigning debtor's creditors along with property belonging to the assigned estate already in the assignee's possession. If an assignee neglects or refuses to sue to recover property transferred with an intent described in Subsection (b) of this section, a creditor, after securing the assignee against cost or liability, may sue in the assignee's name to recover the property.

Acts 1967, 60th Leg., p. 2343, ch. 785, Sec. 1.



Section  23.10.  Assignment Discharges Debtor.

If an assigning debtor makes an assignment, he is discharged from liability on the claim of a consenting creditor unless the consenting creditor does not receive at least one-third of the amount allowed on his claim against the assigned estate.

Acts 1967, 60th Leg., p. 2343, ch. 785, Sec. 1.



Subchapter C. Duties And Rights Of Assignee

Section  23.16.  Assignee's Qualifications, Duty To Record Assignment, And Bond.

(a) An assignee shall be a resident of this state and a resident of the county in which the assigning debtor resides, or in which the assigning debtor's principal business was conducted.

(b)  Immediately after the assignment instrument is executed and delivered to him, the assignee shall record it in the county of his residence and in each county in which there is real property conveyed to the assignee by the assignment.

(c)  Within five days after delivery to him of the assignment instrument, the assignee shall execute a bond

(1)  with a surety who must be approved by the judge of either the county or district court in the county of the assignee's residence;

(2)  conditioned that he will perform faithfully his duties as assignee and distribute proportionately the net proceeds of the assigned estate to the consenting creditors entitled to it under the assignment;

(3)  in an amount fixed by the county or district judge;

(4)  payable to the state; and

(5)  which inures to the benefit of the assigning debtor and each of the creditors.

(d)  The assignee shall file the bond with the county clerk of the county in which the assigning debtor resides and then the assignee shall take possession of the assigned estate and carry out the assignment.

(e)  An assignment is valid as against an assigning debtor or his creditors even though the assignee fails to execute and file a bond as required by Subsections (c) and (d) of this section.

Acts 1967, 60th Leg., p. 2343, ch. 785, Sec. 1.



Section  23.17.  Notice Of Assignee's Appointment.

(a) Within 30 days after an assignment is executed, the assignee shall publish notice of his appointment as assignee in a newspaper published in the county

(1)  where the assigning debtor resides or where he operated his principal business before the assignment; or

(2)  nearest the assigning debtor's residence or principal business if a newspaper is not published in the county of the assigning debtor's residence or principal business.

(b)  The assignee shall publish notice of his appointment as assignee once each week for three consecutive weeks.

(c)  The assignee shall notify by mail each of the assigning debtor's listed creditors of his appointment as assignee.

Acts 1967, 60th Leg., p. 2343, ch. 785, Sec. 1.



Section  23.18.  Replacement Of Assignee.

(a) A county or district court of the county in which the assignee resides shall remove or replace the assignee on application of the assigning debtor or a creditor, or on its own motion,

(1)  if the court is satisfied that the assignee has not executed and filed the bond required by Sections 23.16(c) and (d) of this code;

(2)  if the assignee refuses or fails to serve for any reason; or

(3)  for good cause.

(b)  On removal, resignation, or death of the assignee, the court shall appoint in writing a new assignee in term time or vacation.

(c)  As soon as the new assignee executes and files a bond as required by Sections 23.16(c) and (d) of this code, he shall take possession of the assigned estate and carry out the assignment.

Acts 1967, 60th Leg., p. 2343, ch. 785, Sec. 1.



Section  23.19.  Assignee's Duty To Distribute Assigned Estate.

Each time an assignee has enough money to pay 10 percent of the assigning debtor's debts, he shall distribute the money among the creditors entitled to receive it in proportion to their claims allowed under Section 23.31(b) of this code.

Acts 1967, 60th Leg., p. 2343, ch. 785, Sec. 1.



Section  23.20.  Discount Of Claim Not Due And Allowance Of Secured Claim.

(a) The assignee may allow a claim which is not due at its present value by discounting it at the legal rate.

(b)  If a creditor holds collateral to secure his claim worth less than his claim, the assignee may estimate the value of the collateral and allow the creditor as a claim against the assigned estate only the difference between the value of the collateral and the amount of the claim.

Acts 1967, 60th Leg., p. 2343, ch. 785, Sec. 1.



Section  23.21.  Assignee's Entitlement To Compensation.

An assignee is entitled to reasonable compensation for his services and reimbursement for his necessary expenses, including an attorney's fee, all of which shall be fixed by the county or district court who approved his bond. The compensation, expenses, and attorney's fee fixed by the county or district court shall be paid out of the assigned estate.

Acts 1967, 60th Leg., p. 2343, ch. 785, Sec. 1.



Section  23.22.  Examination Of Debtor Or Other Person.

(a) The court in which a proceeding involving an assigned estate has been filed may, after reasonable notice to each person concerned, compel any person to answer questions under oath on

(1)  application of a creditor of the assigning debtor; or

(2)  its own motion.

(b)  The court may compel attendance and an answer to any question concerning the assigned estate by writ or order as in other cases. Questions asked and answers given during the examination shall be in writing, the person examined shall swear to and sign his answers before the clerk, and the questions and answers shall be filed with the clerk for use by anyone interested in the proceeding.

(c)  The court shall charge the cost of the examination against the applicant or the assigned estate, as the court deems proper.

(d)  The assigning debtor may not be prosecuted or punished for an answer given by him during the examination.

Acts 1967, 60th Leg., p. 2343, ch. 785, Sec. 1.



Section  23.23.  Assignee's Final Report And Discharge.

(a) An assignee wishing to be discharged from his appointment shall prepare and file for record with the county clerk of the county in which his assignment is recorded a sworn report describing

(1)  all property which came into his possession under the assignment; and

(2)  how and to whom he distributed the property.

(b)  The assignee shall also deposit in the registry of the court who approved his bond money belonging to the assigned estate still in his possession at the time he files his report under Subsection (a) of this section. The court shall distribute the money under this chapter to the consenting creditors and assignee and, in the case of surplus, to the nonconsenting creditors and assigning debtor.

Acts 1967, 60th Leg., p. 2343, ch. 785, Sec. 1.



Section  23.24.  Time Limit On Bringing Action Against Assignee.

An action against an assignee based on his conduct in carrying out the assignment, as shown in his report filed under Section 23.23(a) of this code, must be brought within 12 months after the report is filed or the action is barred.

Acts 1967, 60th Leg., p. 2343, ch. 785, Sec. 1.



Subchapter D. Duties And Rights Of Creditors

Section  23.30.  Creditor's Consent To Assignment.

(a) A creditor must inform the assignee in writing of his consent to the assignment within four months after the assignee gives the notice required by Section 23.17 of this code.

(b)  If a creditor is not given actual notice of an assignment, but subsequently learns of the assignment, he may consent to the assignment at any time before the first distribution of the assigned estate is begun.

(c)  Receipt by a creditor of payment for part of his claim from the assignee is conclusive evidence of the creditor's consent to the assignment.

(d)  If a creditor does not consent to an assignment, he is not entitled to receive any of the assigned estate under the assignment.

Acts 1967, 60th Leg., p. 2343, ch. 785, Sec. 1.



Section  23.31.  Creditor's Proof And Assignee's Allowance Of Claim.

(a) Within six months after the first publication of notice of appointment required by Section 23.17 of this code, a consenting creditor must file with the assignee a statement, sworn to by the creditor, his agent, or attorney,

(1)  describing the nature and amount of the creditor's claim against the assigning debtor; and

(2)  stating that

(A)  the claim is true;

(B)  the debt is just; and

(C)  all proper credits or offsets have been allowed against the claim.

(b)  The assignee shall allow a claim filed under Subsection (a) of this section against the assigned estate unless he has good reason to believe the claim is not just and true.

(c)  If a creditor does not file a statement in the time required by Subsection (a) of this section, he is not entitled to receive any of the assigned estate.

Acts 1967, 60th Leg., p. 2343, ch. 785, Sec. 1.



Section  23.32.  Creditor's Suit On Disputed Claim.

(a) The assignee shall give any creditor a copy of any statement of claim filed under Section 23.31(a) of this code if the creditor requests a copy.

(b)  Within eight months after the first publication of notice required by Section 23.17 of this code, an assigning debtor or creditor may sue to

(1)  set aside an allowance made on a claim by the assignee; and

(2)  restrain payment of the claim by the assignee.

Acts 1967, 60th Leg., p. 2343, ch. 785, Sec. 1.



Section  23.33.  Nonconsenting Creditor's Right To Surplus.

If a creditor does not consent to an assignment, he may garnishee the assignee for the excess of the assigned estate remaining in the assignee's possession after the assignee has paid

(1)  each consenting creditor the amount of his claim allowed under Section 23.31(b) of this code; and

(2)  the expense of carrying out the assignment.

Acts 1967, 60th Leg., p. 2343, ch. 785, Sec. 1.

Chapter 24. Uniform Fraudulent Transfer Act

Section  24.001.  Short Title.

This chapter may be cited as the Uniform Fraudulent Transfer Act.

Amended by Acts 1987, 70th Leg., ch. 1004, Sec. 1, eff. Sept. 1, 1987.



Section  24.002.  Definitions.

In this chapter:

(1)  "Affiliate" means:

(A)  a person who directly or indirectly owns, controls, or holds with power to vote, 20 percent or more of the outstanding voting securities of the debtor, other than a person who holds the securities:

(i)  as a fiduciary or agent without sole discretionary power to vote the securities; or

(ii)  solely to secure a debt, if the person has not exercised the power to vote;

(B)  a corporation 20 percent or more of whose outstanding voting securities are directly or indirectly owned, controlled, or held with power to vote, by the debtor or a person who directly or indirectly owns, controls, or holds, with power to vote, 20 percent or more of the outstanding voting securities of the debtor, other than a person who holds the securities:

(i)  as a fiduciary or agent without sole power to vote the securities; or

(ii)  solely to secure a debt, if the person has not in fact exercised the power to vote;

(C)  a person whose business is operated by the debtor under a lease or other agreement, or a person substantially all of whose assets are controlled by the debtor; or

(D)  a person who operates the debtor's business under a lease or other agreement or controls substantially all of the debtor's assets.

(2)  "Asset" means property of a debtor, but the term does not include:

(A)  property to the extent it is encumbered by a valid lien;

(B)  property to the extent it is generally exempt under nonbankruptcy law; or

(C)  an interest in property held in tenancy by the entireties to the extent it is not subject to process by a creditor holding a claim against only one tenant, under the law of another jurisdiction.

(3)  "Claim" means a right to payment or property, whether or not the right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured.

(4)  "Creditor" means a person, including a spouse, minor, person entitled to receive court or administratively ordered child support for the benefit of a child, or ward, who has a claim.

(5)  "Debt" means a liability on a claim.

(6)  "Debtor" means a person who is liable on a claim.

(7)  "Insider" includes:

(A)  if the debtor is an individual:

(i)  a relative of the debtor or of a general partner of the debtor;

(ii)  a partnership in which the debtor is a general partner;

(iii)  a general partner in a partnership described in Subparagraph (ii) of this paragraph; or

(iv)  a corporation of which the debtor is a director, officer, or person in control;

(B)  if the debtor is a corporation:

(i)  a director of the debtor;

(ii)  an officer of the debtor;

(iii)  a person in control of the debtor;

(iv)  a partnership in which the debtor is a general partner;

(v)  a general partner in a partnership described in Subparagraph (iv) of this paragraph; or

(vi)  a relative of a general partner, director, officer, or person in control of the debtor;

(C)  if the debtor is a partnership:

(i)  a general partner in the debtor;

(ii)  a relative of a general partner in, a general partner of, or a person in control of the debtor;

(iii)  another partnership in which the debtor is a general partner;

(iv)  a general partner in a partnership described in Subparagraph (iii) of this paragraph; or

(v)  a person in control of the debtor;

(D)  an affiliate, or an insider of an affiliate as if the affiliate were the debtor; and

(E)  a managing agent of the debtor.

(8)  "Lien" means a charge against or an interest in property to secure payment of a debt or performance of an obligation, and includes a security interest created by agreement, a judicial lien obtained by legal or equitable process or proceedings, a common-law lien, or a statutory lien.

(9)  "Person" means an individual, partnership, corporation, association, organization, government or governmental subdivision or agency, business trust, estate, trust, or any other legal or commercial entity.

(10)  "Property" means anything that may be the subject of ownership.

(11)  "Relative" means an individual related by consanguinity within the third degree as determined by the common law, a spouse, or an individual related to a spouse within the third degree as so determined, and includes an individual in an adoptive relationship within the third degree.

(12)  "Transfer" means every mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing of or parting with an asset or an interest in an asset, and includes payment of money, release, lease, and creation of a lien or other encumbrance. The term does not include a transfer under a disclaimer filed under Section 37A, Texas Probate Code, or Section 112.010, Property Code.

(13)  "Valid lien" means a lien that is effective against the holder of a judicial lien subsequently obtained by legal or equitable process or proceedings.

Amended by Acts 1987, 70th Leg., ch. 1004, Sec. 1, eff. Sept. 1, 1987; Acts 1993, 73rd Leg., ch. 846, Sec. 2, eff. Sept. 1, 1993; Acts 1997, 75th Leg., ch. 911, Sec. 95, eff. Sept. 1, 1997.



Section  24.003.  Insolvency.

(a) A debtor is insolvent if the sum of the debtor's debts is greater than all of the debtor's assets at a fair valuation.

(b)  A debtor who is generally not paying the debtor's debts as they become due is presumed to be insolvent.

(c)  A partnership is insolvent under Subsection (a) of this section if the sum of the partnership's debts is greater than the aggregate, at a fair valuation, of all of the partnership's assets and the sum of the excess of the value of each general partner's nonpartnership assets over the partner's nonpartnership debts.

(d)  Assets under this section do not include property that has been transferred, concealed, or removed with intent to hinder, delay, or defraud creditors or that has been transferred in a manner making the transfer voidable under this chapter.

(e)  Debts under this section do not include an obligation to the extent it is secured by a valid lien on property of the debtor not included as an asset.

Amended by Acts 1987, 70th Leg., ch. 1004, Sec. 1, eff. Sept. 1, 1987; Acts 1993, 73rd Leg., ch. 570, Sec. 8, eff. Sept. 1, 1993.



Section  24.004.  Value.

(a) Value is given for a transfer or an obligation if, in exchange for the transfer or obligation, property is transferred or an antecedent debt is secured or satisfied, but value does not include an unperformed promise made otherwise than in the ordinary course of the promisor's business to furnish support to the debtor or another person.

(b)  For the purposes of Sections 24.005(a)(2) and 24.006 of this code, a person gives a reasonably equivalent value if the person acquires an interest of the debtor in an asset pursuant to a regularly conducted, noncollusive foreclosure sale or execution of a power of sale for the acquisition or disposition of the interest of the debtor upon default under a mortgage, deed of trust, or security agreement.

(c)  A transfer is made for present value if the exchange between the debtor and the transferee is intended by them to be contemporaneous and is in fact substantially contemporaneous.

(d)  "Reasonably equivalent value" includes without limitation, a transfer or obligation that is within the range of values for which the transferor would have sold the assets in an arm's length transaction.

Amended by Acts 1987, 70th Leg., ch. 1004, Sec. 1, eff. Sept. 1, 1987; Acts 1993, 73rd Leg., ch. 570, Sec. 9, eff. Sept. 1, 1993.



Section  24.005.  Transfers Fraudulent As To Present And Future Creditors.

(a) A transfer made or obligation incurred by a debtor is fraudulent as to a creditor, whether the creditor's claim arose before or within a reasonable time after the transfer was made or the obligation was incurred, if the debtor made the transfer or incurred the obligation:

(1)  with actual intent to hinder, delay, or defraud any creditor of the debtor; or

(2)  without receiving a reasonably equivalent value in exchange for the transfer or obligation, and the debtor:

(A)  was engaged or was about to engage in a business or a transaction for which the remaining assets of the debtor were unreasonably small in relation to the business or transaction; or

(B)  intended to incur, or believed or reasonably should have believed that the debtor would incur, debts beyond the debtor's ability to pay as they became due.

(b)  In determining actual intent under Subsection (a)(1) of this section, consideration may be given, among other factors, to whether:

(1)  the transfer or obligation was to an insider;

(2)  the debtor retained possession or control of the property transferred after the transfer;

(3)  the transfer or obligation was concealed;

(4)  before the transfer was made or obligation was incurred, the debtor had been sued or threatened with suit;

(5)  the transfer was of substantially all the debtor's assets;

(6)  the debtor absconded;

(7)  the debtor removed or concealed assets;

(8)  the value of the consideration received by the debtor was reasonably equivalent to the value of the asset transferred or the amount of the obligation incurred;

(9)  the debtor was insolvent or became insolvent shortly after the transfer was made or the obligation was incurred;

(10)  the transfer occurred shortly before or shortly after a substantial debt was incurred; and

(11)  the debtor transferred the essential assets of the business to a lienor who transferred the assets to an insider of the debtor.

Amended by Acts 1987, 70th Leg., ch. 1004, Sec. 1, eff. Sept. 1, 1987; Acts 1993, 73rd Leg., ch. 570, Sec. 10, eff. Sept. 1, 1993.



Section  24.006.  Transfers Fraudulent As To Present Creditors.

(a) A transfer made or obligation incurred by a debtor is fraudulent 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 fraudulent 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.

Amended by Acts 1987, 70th Leg., ch. 1004, Sec. 1, eff. Sept. 1, 1987.



Section  24.007.  When Transfer Is Made Or Obligation Is Incurred.

For the purposes of this chapter:

(1)  a transfer is made:

(A)  with respect to an asset that is real property other than a fixture, but including the interest of a seller or purchaser under a contract for the sale of the asset, when the transfer is so far perfected that a good faith purchaser of the asset from the debtor against whom applicable law permits the transfer to be perfected cannot acquire an interest in the asset that is superior to the interest of the transferee; and

(B)  with respect to an asset that is not real property or that is a fixture, when the transfer is so far perfected that a creditor on a simple contract cannot acquire a judicial lien otherwise than under this chapter that is superior to the interest of the transferee;

(2)  if applicable law permits the transfer to be perfected as provided in Subdivision (1) of this section and the transfer is not so perfected before the commencement of an action for relief under this chapter, the transfer is deemed made immediately before the commencement of the action;

(3)  if applicable law does not permit the transfer to be perfected as provided in Subdivision (1) of this section, the transfer is made when it becomes effective between the debtor and the transferee;

(4)  a transfer is not made until the debtor has acquired rights in the asset transferred; and

(5)  an obligation is incurred:

(A)  if oral, when it becomes effective between the parties; or

(B)  if evidenced by a writing, when the writing executed by the obligor is delivered to or for the benefit of the obligee.

Amended by Acts 1987, 70th Leg., ch. 1004, Sec. 1, eff. Sept. 1, 1987.



Section  24.008.  Remedies Of Creditors.

(a) In an action for relief against a transfer or obligation under this chapter, a creditor, subject to the limitations in Section 24.009 of this code, may obtain:

(1)  avoidance of the transfer or obligation to the extent necessary to satisfy the creditor's claim;

(2)  an attachment or other provisional remedy against the asset transferred or other property of the transferee in accordance with the applicable Texas Rules of Civil Procedure and the Civil Practice and Remedies Code relating to ancillary proceedings; or

(3)  subject to applicable principles of equity and in accordance with applicable rules of civil procedure:

(A)  an injunction against further disposition by the debtor or a transferee, or both, of the asset transferred or of other property;

(B)  appointment of a receiver to take charge of the asset transferred or of other property of the transferee; or

(C)  any other relief the circumstances may require.

(b)  If a creditor has obtained a judgment on a claim against the debtor, the creditor, if the court so orders, may levy execution on the asset transferred or its proceeds.

Amended by Acts 1987, 70th Leg., ch. 1004, Sec. 1, eff. Sept. 1, 1987.



Section  24.009.  Defenses, Liability, And Protection Of Transferee.

(a) A transfer or obligation is not voidable under Section 24.005(a)(1) of this code against a person who took in good faith and for a reasonably equivalent value or against any subsequent transferee or obligee.

(b)  Except as otherwise provided in this section, to the extent a transfer is voidable in an action by a creditor under Section 24.008(a)(1) of this code, the creditor may recover judgment for the value of the asset transferred, as adjusted under Subsection (c) of this section, or the amount necessary to satisfy the creditor's claim, whichever is less. The judgment may be entered against:

(1)  the first transferee of the asset or the person for whose benefit the transfer was made; or

(2)  any subsequent transferee other than a good faith transferee who took for value or from any subsequent transferee.

(c)(1) Except as provided by Subdivision (2) of this subsection, if the judgment under Subsection (b) of this section is based upon the value of the asset transferred, the judgment must be for an amount equal to the value of the asset at the time of the transfer, subject to adjustment as the equities may require.

(2)  The value of the asset transferred is not to be adjusted to include the value of improvements made by a good faith transferee, including:

(A)  physical additions or changes to the asset transferred;

(B)  repairs to the asset;

(C)  payment of any tax on the asset;

(D)  payment of any debt secured by a lien on the asset that is superior or equal to the rights of a voiding creditor under this chapter; and

(E)  preservation of the asset.

(d)(1) Notwithstanding voidability of a transfer or an obligation under this chapter, a good faith transferee or obligee is entitled, at the transferee's or obligee's election, to the extent of the value given the debtor for the transfer or obligation, to:

(A)  a lien, prior to the rights of a voiding creditor under this chapter, or a right to retain any interest in the asset transferred;

(B)  enforcement of any obligation incurred; or

(C)  a reduction in the amount of the liability on the judgment.

(2)  Notwithstanding voidability of a transfer under this chapter, to the extent of the value of any improvements made by a good faith transferee, the good faith transferee is entitled to a lien on the asset transferred prior to the rights of a voiding creditor under this chapter

(e)  A transfer is not voidable under Section 24.005(a)(2) or Section 24.006 of this code if the transfer results from:

(1)  termination of a lease upon default by the debtor when the termination is pursuant to the lease and applicable law; or

(2)  enforcement of a security interest in compliance with Chapter 9 of this code.

(f)  A transfer is not voidable under Section 24.006(b) of this code:

(1)  to the extent the insider gave new value to or for the benefit of the debtor after the transfer was made unless the new value was secured by a valid lien;

(2)  if made in the ordinary course of business or financial affairs of the debtor and the insider; or

(3)  if made pursuant to a good-faith effort to rehabilitate the debtor and the transfer secured present value given for that purpose as well as an antecedent debt of the debtor.

Amended by Acts 1987, 70th Leg., ch. 1004, Sec. 1, eff. Sept. 1, 1987; Acts 1993, 73rd Leg., ch. 570, Sec. 11, eff. Sept. 1, 1993.



Section  24.010.  Extinguishment Of Cause Of Action.

(a) Except as provided by Subsection (b) of this section, a cause of action with respect to a fraudulent transfer or obligation under this chapter is extinguished unless action is brought:

(1)  under Section 24.005(a)(1) of this code, within four years after the transfer was made or the obligation was incurred or, if later, within one year after the transfer or obligation was or could reasonably have been discovered by the claimant;

(2)  under Section 24.005(a)(2) or 24.006(a) of this code, within four years after the transfer was made or the obligation was incurred; or

(3)  under Section 24.006(b) of this code, within one year after the transfer was made.

(b)  A cause of action on behalf of a spouse, minor, or ward with respect to a fraudulent transfer or obligation under this chapter is extinguished unless the action is brought:

(1)  under Section 24.005(a) or 24.006(a) of this code, within two years after the cause of action accrues, or if later, within one year after the transfer or obligation was or could reasonably have been discovered by the claimant; or

(2)  under Section 24.006(b) of this code within one year after the date the transfer was made.

(c)  If a creditor entitled to bring an action under this chapter is under a legal disability when a time period prescribed by this section starts, the time of the disability is not included in the period. A disability that arises after the period starts does not suspend the running of the period. A creditor may not tack one legal disability to another to extend the period. For the purposes of this subsection, a creditor is under a legal disability if the creditor is:

(1)  younger than 18 years of age, regardless of whether the person is married; or

(2)  of unsound mind.

Amended by Acts 1987, 70th Leg., ch. 1004, Sec. 1, eff. Sept. 1, 1987; Acts 1993, 73rd Leg., ch. 570, Sec. 12, eff. Sept. 1, 1993.



Section  24.011.  Supplementary Provisions.

Unless displaced by the provisions of this chapter, the principles of law and equity, including the law merchant and the law relating to principal and agent, estoppel, laches, fraud, misrepresentation, duress, coercion, mistake, insolvency, or other validating or invalidating cause, supplement its provisions.

Amended by Acts 1987, 70th Leg., ch. 1004, Sec. 1, eff. Sept. 1, 1987.



Section  24.012.  Uniformity Of Application And Construction.

This chapter shall be applied and construed to effectuate its general purpose to make uniform the law with respect to the subject of this chapter among states enacting it.

Amended by Acts 1987, 70th Leg., ch. 1004, Sec. 1, eff. Sept. 1, 1987.



Section  24.013.  Costs.

In any proceeding under this chapter, the court may award costs and reasonable attorney's fees as are equitable and just.

Added by Acts 2003, 78th Leg., ch. 420, Sec. 1, eff. Sept. 1, 2003.


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