Georgia Debtor and Creditor Relations

Title 18. Debtor and Creditor
Chapter 2. Debtor and Creditor Relations

ARTICLE 1. GENERAL PROVISIONS

ARTICLE 2. ACTS VOID AS AGAINST CREDITORS

ARTICLE 3. PREFERENCES AND ASSIGNMENTS FOR BENEFIT OF CREDITORS

ARTICLE 4. UNIFORM FRAUDULENT TRANSFERS

ARTICLE 1. GENERAL PROVISIONS

§ 18-2-1. Creation of relationship of debtor and creditor

Whenever one person, by contract or by law, is liable and bound to pay to another an amount of money, certain or uncertain, the relation of debtor and creditor exists between them.

§ 18-2-2. Compulsory election of remedy least likely to jeopardize rights of other creditors

As among themselves, creditors shall so prosecute their own rights as not to jeopardize unnecessarily the rights of others; hence, a creditor having a lien on two funds of the debtor, equally accessible to him, will be compelled to pursue the one on which other creditors have no lien.

§ 18-2-3. Reaching of equitable assets by creditors

Courts of equity jurisdiction shall assist creditors in reaching equitable assets in every case where to refuse interference would jeopardize the collection of their debts.

ARTICLE 2. ACTS VOID AS AGAINST CREDITORS

§ 18-2-20. Rights of creditors to be favored by courts

The rights of creditors shall be favored by the courts; and every remedy and facility shall be afforded them to detect, defeat, and annul any effort to defraud them of their just rights.

§ 18-2-21. Right of creditors to attack judgments, conveyances, or other arrangements interfering with creditors' rights

Creditors may attack as fraudulent a judgment, conveyance, or any other arrangement interfering with their rights, either at law or in equity.

§ 18-2-22. Conveyances by debtors deemed fraudulent

Reserved. Repealed by Ga. L. 2002, p. 141, § 2, effective July 1, 2002.

[Repealed]

§ 18-2-23. Validity of conveyance to innocent subsequent purchaser

Reserved. Repealed by Ga. L. 2002, p. 141, § 2, effective July 1, 2002.

[Repealed]

§ 18-2-24. Effect of giving debtor permission to exercise dominion over or use property conveyed, assigned, or mortgaged as security for any debt

Where any property is conveyed, assigned, or mortgaged as security for any debt and permission is given to the debtor to exercise dominion over or to use the property or the proceeds thereof or any part thereof, the giving of such permission shall not cause the conveyance, assignment, or mortgage to be deemed fraudulent or to create a presumption of fraud as to creditors.

§ 18-2-25. Effect of misrepresentation, suppression of material fact, or private agreement giving preference upon settlement between debtor and creditor

If a debtor misrepresents or suppresses any material fact in the statement of his affairs either as to the amount of his property or of his indebtedness, the composition shall be void. If a debtor privately agrees to give a creditor better security or to pay a creditor more than other creditors, the contract with the others shall be void.

ARTICLE 3. PREFERENCES AND ASSIGNMENTS FOR BENEFIT OF CREDITORS

§ 18-2-40. Right of debtor to prefer creditors

A debtor may prefer one creditor over another; and to that end he may rightfully give a lien by mortgage or other legal means, sell in payment of the debt, or transfer choses in action as collateral security, where the surplus in such cases is not reserved for the debtor's own benefit.

§ 18-2-41. Right of nonmunicipal corporation to assign for benefit of creditors and prefer creditors

Any corporation, not municipal, may make an assignment for the benefit of creditors; but no such corporation shall be allowed in such assignment to prefer any creditor or class of creditors, except creditors who have debts entitled to priority by law.

§ 18-2-42. Right of persons and firms to make assignments and prefer creditors

Persons and firms may make assignments and prefer creditors.

§ 18-2-43. Deeds of assignment for benefit of creditors -- Execution, filing, and recording

In all cases the deed of assignment for the benefit of creditors shall be executed, filed, and recorded as provided for deeds in Code Section 44-2-1.

§ 18-2-44. Deeds of assignment for benefit of creditors -- Property to be conveyed generally; description of property; attachment of list of creditors of assignor

(a) All assignments referred to in Code Section 18-2-42 shall convey all of the property of every sort which is claimed or owned by the assignor at the time of the execution thereof. Such assignments shall:

(1) Identify any lands owned or any interest in lands;

(2) Identify goods, wares, and merchandise by general words of description, indicating the location, kind, and quality thereof, with a statement as accurate as possible, containing the purchase price and selling price of the lot as a whole; and

(3) Describe in general terms any shares of capital stock, livestock, or personal property which are not connected with any mercantile or manufacturing business.

(b) The assignor shall attach a list of all creditors with their post office addresses and amounts due to each.

§ 18-2-45. Deeds of assignment for benefit of creditors -- Conveyances; statements as to aggregate amounts

Assignments referred to in Code Section 18-2-42 shall convey all books, books of account, choses in action, notes, drafts, bills, judgments, liens, and mortgages held or owned, indicating, as near as may be, the aggregate amount thereof, with a statement as to the total amounts which are considered good, doubtful, or bad.

§ 18-2-46. Deeds of assignment for benefit of creditors -- Annexation of affidavit to deed; contents of affidavit

At the time of signing the deed of assignment provided for in Code Section 18-2-43, the person or firm making an assignment or the officer acting for the corporation making an assignment shall make an affidavit which shall be annexed to such assignment, and which affidavit shall state that:

(1) The assignment conveys all property held, claimed, or owned by the assignor at the time of making the assignment;

(2) All recitals and all estimates of totals and values therein and all list creditors are true to the best of his knowledge and belief;

(3) The debts set out as due to the preferred creditors are bona fide just, due, and unpaid; and

(4) The assignment is not made for the purpose of hindering, delaying, or defrauding creditors.

§ 18-2-47. Preparation after recording of assignment of list of all property of assignor at time of assignment; affidavits of assignor and assignee as to accuracy of list

Within 15 days after the recording of the assignment provided for in Code Section 18-2-43, the assignor shall, in connection with the assignee, prepare a full and complete list of all property of every kind, character, and description held, claimed, owned, or possessed by the assignor at the date of making such assignment, to which shall be attached the affidavit of the assignor that the list is true. The assignee shall also attach an affidavit that he has examined the books and other papers of the assignor, that he assisted in the preparation of the list as far as possible, and that to the best of his knowledge, information, and belief the list is correct. If he cannot make such affidavit, he shall state the reason therefor.

§ 18-2-48. List to remain on file ten days

The list referred to in Code Section 18-2-47 shall remain on file for ten days in the clerk of the court's office in the county in which the assignment was filed, subject to examination by any interested person.

§ 18-2-49. Correcting of innocent or unintentional mistake or omission in list of assets or creditors

Where an unintentional mistake or omission has been made in the description of the property, in the list of assets, in the method of preparing the list of assets, or in the list of creditors, the same may be amended upon proof thereof to the court.

§ 18-2-50. Notification of creditors of filing of assignment; notification of creditors of institution of actions attacking assignment; sufficient notice

Within 30 days after filing the assignment, the assignee shall notify each creditor that the same has been filed. Within 30 days after the date the assignee is served with the complaint attacking the assignment, he shall give notice of the filing of the complaint to each creditor named. Depositing a letter in the post office, stamped and properly addressed, shall be sufficient notice under this Code section.

§ 18-2-51. Foreign assignments to conform with laws of state

No property in this state shall pass under any assignment made by corporations, persons, or firms out of this state unless such foreign assignment shall conform to the law of assignments in this state.

§ 18-2-52. Provision and filing of bond by assignee for benefit of assignor's creditors; amount of bond

Upon the request of any three of the creditors of the assignor, the assignee shall make and file a bond with surety, in a sum to be fixed by the judge of the superior court, conditioned for the faithful performance of his trust, which bond shall be made payable to the judge of the probate court of the county and his successors in office, for the benefit of all creditors of the assignor. In no case shall the bond be less than the estimated value of the property assigned.

§ 18-2-53. Duties of assignee generally; payment of preferred debts after filing

The assignee shall proceed to carry out the duties imposed upon him by the assignment, but he shall not pay any preferred debt until after 60 days from the filing of the assignment in the clerk of the court's office in the county in which the assignment was filed.

§ 18-2-54. Powers and rights of assignee

The assignee shall succeed to all rights of the assignor but may attack and set aside any fraudulent conveyances or recover property conveyed by the assignor for the purpose of hindering, delaying, or defrauding creditors.

§ 18-2-55. Actions to set aside assignments -- Nature of actions generally; priorities and payment to creditors on judgments rendered after filing of complaint to set aside assignment

No assignment shall be set aside except in a direct action filed for that purpose; and no creditor shall obtain any priority or preference of payment out of the assets assigned on any judgment rendered after the filing of a complaint to set aside the assignment if the assignment is set aside and decreed to be void.

§ 18-2-56. Actions to set aside assignments -- Parties

In all actions to set aside assignments, the assignee and assignor shall be indispensable parties; and any preferred or unpreferred creditor may be made a party plaintiff or defendant at any time in term or vacation.

§ 18-2-57. Actions to set aside assignments -- Necessity of showing fraud, collusion, or notice thereof in assignee

When the assignment is attacked as fraudulent or void for any reason, it shall not be necessary to show fraud or collusion or notice thereof in the assignee in order to render the assignment void.

§ 18-2-58. Necessity for reduction of debt to judgment before action against assignor or assignee

No creditor shall be required to reduce his debt to judgment before asking equitable relief in any action against the assignor or assignee, or both.

§ 18-2-59. Appointment of new assignees upon death or removal from jurisdiction of courts of state of sole or surviving assignee; authority thereof

In all cases of assignments for the benefit of creditors, where the sole or surviving assignee has died or moved beyond the jurisdiction of the courts of the state, the superior courts of this state shall have full power and authority, upon the petition of two or more of the parties interested in such assignment and on such notice as the court shall direct, in a summary manner, to appoint a new assignee or assignees in the place of the deceased or nonresident assignee; and the new assignee shall have all the authority and responsibilities of the deceased or nonresident assignee; and all laws or enactments shall be as applicable and in as full force in respect to the new as to the old assignee; and the court may in its discretion require a bond and security of such assignee.

ARTICLE 4. UNIFORM FRAUDULENT TRANSFERS

§ 18-2-70. Short title

This article shall be known and may be cited as the "Uniform Fraudulent Transfers Act."

§ 18-2-71. Definitions

As used in this article, the term:

(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.

(3) "Claim" means a right to payment, 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 who has a claim.

(5) "Debt" means 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 division (ii) of this subparagraph; 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 division (iv) of this subparagraph; 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, or 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 division (iii) of this subparagraph; 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.

(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.

§ 18-2-72. Determining 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 his or her debts as they become due is presumed to be insolvent.

(c) A partnership is insolvent under subsection (a) of this Code section if the sum of the partnership's debts is greater than the aggregate of all of the partnership's assets, at a fair valuation, 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 Code 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 article.

(e) Debts under this Code 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.

§ 18-2-73. Value given for transfer

(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 paragraph (2) of subsection (a) of Code Section 18-2-74 and Code Section 18-2-75, 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.

§ 18-2-74. Fraudulent transfer; determination of actual intent

(a) A transfer made or obligation incurred by a debtor is fraudulent as to a creditor, whether the creditor's claim arose before or 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 he or she would incur, debts beyond his or her ability to pay as they became due.

(b) In determining actual intent under paragraph (1) of subsection (a) of this Code 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 disclosed or 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.

§ 18-2-75. Transfer or obligation fraudulent if incurred without receiving reasonably equivalent value

(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.

§ 18-2-76. When transfer made

For the purposes of this article:

(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 article that is superior to the interest of the transferee;

(2) If applicable law permits the transfer to be perfected as provided in paragraph (1) of this Code section and the transfer is not so perfected before the commencement of an action for relief under this article, 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 paragraph (1) of this Code 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.

§ 18-2-77. Relief for creditor against fraudulent transfer or obligation

(a) In an action for relief against a transfer or obligation under this article, a creditor, subject to the limitations in Code Section 18-2-78, 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 procedure prescribed by Chapter 3 of this title;

(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.

§ 18-2-78. Conditions for voidability of transfer or obligation; judgment

(a) A transfer or obligation is not voidable under paragraph (1) of subsection (a) of Code Section 18-2-74 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 Code section, to the extent a transfer is voidable in an action by a creditor under paragraph (1) of subsection (a) of Code Section 18-2-77, the creditor may recover judgment for the value of the asset transferred, as adjusted under subsection (c) of this Code 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 or obligee who took for value or from any subsequent transferee or obligee.

(c) If the judgment under subsection (b) of this Code 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.

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

(1) A lien on or a right to retain any interest in the asset transferred;

(2) Enforcement of any obligation incurred; or

(3) A reduction in the amount of the liability on the judgment.

(e) A transfer is not voidable under paragraph (2) of subsection (a) of Code Section 18-2-74 or Code Section 18-2-75 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 Article 9 of the Uniform Commercial Code.

(f) A transfer is not voidable under subsection (b) of Code Section 18-2-75:

(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 the present value given for that purpose as well as an antecedent debt of the debtor.

§ 18-2-79. Time for commencement of action

A cause of action with respect to a fraudulent transfer or obligation under this article is extinguished unless action is brought:

(1) Under paragraph (1) of subsection (a) of Code Section 18-2-74, 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 paragraph (2) of subsection (a) of Code Section 18-2-74 or subsection (a) of Code Section 18-2-75, within four years after the transfer was made or the obligation was incurred; or

(3) Under subsection (b) of Code Section 18-2-75, within one year after the transfer was made or the obligation was incurred.

§ 18-2-80. Principles of law and equity remain applicable; application of state and federal law

(a) Unless displaced by the provisions of this article, 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.

(b) The provisions of this article do not create a cause of action for a governmental entity or its agent or assignee with respect to a transaction which may otherwise constitute a fraudulent transfer or obligation under this article if the transaction complies with the applicable state and federal laws concerning transfers of property in the determination of eligibility for public benefits.

GA Georgia Official State Statutes

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