Statute of Limitations of the Debtor-Creditor Law for Fraudulent Conveyance in New York

When someone files for bankruptcy or seeks other forms of debtor protection, they may be tempted to transfer property to a friend or close relative to prevent creditors from liquidating that property. Such a transaction is known as a fraudulent conveyance, and creditors can take the relevant individuals to court to negate such transactions. In New York, as with most states, there is a statute of limitations on the time within such a court case may be commenced.

Statute of Limitations

A statute of limitations is a time period within which a legal action must be pursued. After the statute of limitations period has expired, the relevant action generally may not be pursued. Statute of limitations are put in place to ensure certainty and finality in everyday life. It is deemed socially undesirable for a cause of action to be brought over a transaction or occurrence that happened decades before the legal remedy is sought. Statutes of limitations in New York may be anywhere from 1 to 10 years.

Tolling of the Statute of Limitations

The statute of limitations does not necessarily run from the time at which the underlying transaction or occurrence takes place. Particularly when fraud is involved, statutes of limitations often do not run until the fraud was discovered or should have been discovered as opposed to when the fraud actually took place.

Fraudulent Conveyance

In debtor/creditor situations, fraudulent conveyance refers to situations in which property was conveyed by a debtor with the intent to defraud a creditor. For example, a debtor might sell his expensive vacation home to a close relative for a fraction of its true value to avoid having the property liquidated by creditors.

Statute of Limitations for Fraudulent Conveyance

In New York, the statute of limitations for filing a fraudulent conveyance action is six years after the time at which the transfer was made. This means that the statutory period begins to run immediately after the conveyance as opposed to at some later event, such as when the fraud was discovered.