Several years ago, New York State enacted the Uniform Voidable Transactions Act (the “UVTA”), which primarily clarified the rights and remedies of parties who have engaged in transactions with financially distressed entities. Cullen and Dykman released a legal alert analyzing that enactment. See Uniform Voidable Transactions Act Signed into Law on December 6, 2019 - Cullen and Dykman LLP.
One of the remedies available to creditors injured by a transfer of property or incurrence of an obligation that is (i) intentionally fraudulent because it was incurred with actual intent to hinder, delay or defraud creditors or (ii) constructively fraudulent because it was for less than a “reasonable equivalent” by a financially distressed debtor, is an avoidance of that transfer.
Case law has developed as courts have analyzed and applied the UVTA to a number of circumstances. One such recent decision out of the Southern District of Florida Bankruptcy Court applied the UVTA to a transfer of New York real property. See In re Itshaik, No. 25-24251-SMG, 2026 WL 3012655 (Bankr. S.D. Fla. Oct. 6, 2026). The development of the UVTA case law is important to watch for any entity who may be involved in a transaction with a potentially financially distressed party.
In In re Itshaik, a father attempted to create two trusts for the benefit of his two sons, and placed in each trust a parcel of real property that he owned. Several years after the creation of these trusts, a bank (the “Bank”) obtained judgments against the father, and then attempted to use the UVTA to avoid the transfer of the real property into the trusts.
The state court eventually held that the transfers were avoidable. The father subsequently declared chapter 7 bankruptcy, and in his schedules, portrayed his ownership of said real property as being in his name, but not technically his.[1]
Nevertheless, the chapter 7 trustee sought to sell this real property, arguing that the avoidance of the transfer under the UVTA re-vested the property back to the father. The sons objected to this motion on the basis that that the UVTA does not re-vest title of any avoided actions back to the original transferor.
I. Crucial Developments in Interpreting the UVTA in the Context of Bankruptcy
One of the core tenets of bankruptcy is that, upon the filing of bankruptcy, an estate is created that encompasses all legal and equitable interest the debtor has in property at the time of the filing of the case. This is important, because if property is part of the estate, then the appointed trustee can sell said property with the approval of the Bankruptcy Court. Pivotally, the determination of what property a debtor has an interest in, is derived from state law.
One of the clauses in the UVTA states that, upon a set of elements being met, “[a] transfer made or obligation incurred by a debtor is voidable as to a creditor.” N.Y. Debt. & Cred. Law § 273. Compare this to the Bankruptcy Code’s own statute governing what occurs upon an avoidable transfer, which states “to the extent that a transfer is avoided . . . the trustee may recover, for the benefit of the estate, the property transferred.” 11 U.S.C. § 550.
This distinction was significant in the court’s eyes.
As the UVTA was the basis for the trustee’s argument for why the real property was the father’s, and therefore the estate’s upon the father’s declaration of bankruptcy, the court needed to determine whether the UVTA actually re-vested the property back to the father.
The Bankruptcy Court ultimately determined that the language of the UVTA did not re-vest the property back to the father. As the transfer was “voidable as to a creditor,” rather than back to the original transferor, the father in this situation never actually received title to the real property again.
Compare this to the language in the Bankruptcy Code, which vests property “for the benefit of the estate.” As this language is not present in the UVTA, the Bankruptcy Court held that the real property was not part of the bankruptcy estate. Therefore, the chapter 7 trustee did not have the right to sell the property.
II. Why this Matters
This decision is instructive for both potential debtors and creditors, in the event a bankruptcy is filed.
For debtors, this decision is a helpful lesson for what occurs when a transfer is avoided under the UVTA. Even outside bankruptcy, the successful employment of the UVTA to avoid a transfer of property, does not revest title back to the debtor. The ball is in the court of the party who has successfully used the UVTA to avoid a transfer, to determine what remedy they wish to employ. See, e.g., N.Y. Debt. & Cred. Law § 276.
For creditors, seeking relief under the UVTA is particularly attractive in light of this decision. Had the Bankruptcy Court ruled that the UVTA did in fact re-vest property back to the estate, the chapter 7 trustee could sell the real property, and the funds from the sale would then be distributed in order of priority following the Bankruptcy Code. It is conceivable that the Bank could have received pennies on the dollar, or even nothing at all.
However, because the real property was never re-vested in the father, the real property was not part of the estate, and therefore, the Bankruptcy Court did not have jurisdiction over the real property. Ergo, the Bank could determine what relief they want under the UVTA, and do so without supervision from the Bankruptcy Court, nor need approval from the Bankruptcy Court.
This decision does not contemplate how the UVTA interacts with general avoidance powers under the Bankruptcy Code. The Bankruptcy Code gives to the trustee certain avoidance powers in the event a number of elements are met, and if employed successfully, would allow a trustee to avoid transfers for the benefit of the estate.
The trustee did not use the avoidance powers under the Bankruptcy Code, but if he had, it would be interesting to contemplate the interaction between state and federal statutes, and ultimately, who would have title to a property in question.
Please note that this is a general overview of the law and no content within this excerpt constitutes legal advice. Nothing herein creates an attorney-client relationship between the authors and the reader.
Footnote
[1] It appears the father himself was unsure as to whether he had title. In the schedules he filed with the court, the father listed the properties as “on my name but not mine.”