CO Code § 38-8-102 (2021)
2021 Colorado Code|Title 38 - Property - Real and Personal|Article 8 - Fraudulent Transfers|§ 38-8-102. Definitions

 As used in this article, unless the context otherwise requires:    “Affiliate” means:   A person who directly or indirectly owns, controls, or holds with power to vote twenty percent or more of the outstanding voting securities of the debtor, other than a person who holds the securities:   As a fiduciary or agent without sole discretionary power to vote the securities; or    Solely to secure a debt, if the person has not exercised the power to vote;       A corporation, twenty 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, twenty percent or more of the outstanding voting securities of the debtor, other than a person who holds the securities:   As a fiduciary or agent without sole power to vote the securities; or    Solely to secure a debt, if the person has not in fact exercised the power to vote;       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    A person who operates the debtor's business under a lease or other agreement or controls substantially all of the debtor's assets.       “Asset” means property of a debtor. “Asset” shall not include:   Property to the extent it is encumbered by a valid lien;    Property to the extent it is generally exempt immediately prior to the time of transfer under nonbankruptcy law; or    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.       “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.    “Control” of a debtor or debtor's property by another person does not include conduct undertaken by the other person to enforce rights existing under a valid agreement, entered into in good faith and not primarily for the purpose of obtaining control of the debtor or the debtor's property, including without limitation a lease of such property.    “Creditor” means a person who has a claim.    “Debt” means liability on a claim.    “Debtor” means a person who is liable on a claim.    “Insider” means:   If the debtor is an individual:   A relative of the debtor or of a general partner of the debtor;    A partnership in which the debtor is a general partner;    A general partner in a partnership described in subparagraph (II) of this paragraph (a); or    A corporation of which the debtor is a director, officer, or person in control;       If the debtor is a corporation:   A director of the debtor;    An officer of the debtor;    A person in control of the debtor;    A partnership in which the debtor is a general partner;    A general partner in a partnership described in subparagraph (IV) of this paragraph (b); or    A relative of a general partner, director, officer, or person in control of the debtor;       If the debtor is a partnership:   A general partner in the debtor;    A relative of a general partner in, or a general partner of, or a person in control of the debtor;    Another partnership in which the debtor is a general partner;    A general partner in a partnership described in subparagraph (III) of this paragraph (c); or    A person in control of the debtor;       An affiliate, or an insider of an affiliate as if the affiliate were the debtor; or    A managing agent of the debtor.       “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.    “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.    “Property” means anything that may be the subject of ownership.    “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.    “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.    “Valid lien” means a lien that is effective against the holder of a judicial lien subsequently obtained by legal or equitable process or proceedings.     History. Source: L. 91: Entire article added, p. 1681, § 1, effective July 1.    Editor's note - Colorado legislative change: This section was numbered as section 1 in the uniform act. In the introductory portion to this section, after the word “article”, Colorado added a comma and the words “unless the context otherwise requires”. In the introductory portion to subsection (2), Colorado replaced a comma with a period and changed the words “but the term does not include” to “‘Asset ' shall not include”. In subsection (2)(b), after “exempt”, Colorado added “immediately prior to the time of transfer”. The definition of “control” in subsection (4) has been added and subsequent definitions renumbered accordingly. In subsection (8), the word “means” has been substituted for “includes”.   OFFICIAL COMMENT    The definition of “affiliate” is derived from § 101(2) of the Bankruptcy Code.    The definition of “asset” is substantially to the same effect as the definition of “assets” in § 1 of the Uniform Fraudulent Conveyance Act. The definition in this Act, unlike that in the earlier Act, does not, however require a determination that the property is liable for the debts of the debtor. Thus, an unliquidated claim for damages resulting from personal injury or a contingent claim of a surety for reimbursement, contribution, or subrogation may be counted as an asset for the purpose of determining whether the holder of the claim is solvent as a debtor under § 2 of this Act (numbered as section 38-8-103 in C.R.S.), although applicable law may not allow such an asset to be levied on and sold by a creditor. Cf. Manufacturers & Traders Trust Co. v. Goldman (In re Ollag Construction Equipment Corp.), 578 F.2d 904, 907-09 (2d Cir. 1978).    The definition of “claim” is derived from § 101(4) of the Bankruptcy Code. Since the purpose of this Act is primarily to protect unsecured creditors against transfers and obligations injurious to their rights, the words “claim” and “debt” as used in the Act generally have reference to an unsecured claim and debt. As the context may indicate, however, usage of the terms is not so restricted. See, e.g. §§ 1(1)(i)(B) (numbered as section 38-8-102 (1)(b)(II) in C.R.S.) and 1(8) (numbered as section 38-8-102 (9) in C.R.S.).    The definition of “creditor” in combination with the definition of “claim” has substantially the same effect as the definition of “creditor” under § 1 of the Uniform Fraudulent Conveyance Act. As under that Act, the holder of an unliquidated tort claim or a contingent claim may be a creditor protected by this Act.    The definition of “debt” is derived from § 101(11) of the Bankruptcy Code.    The definition of “debtor” is new.    The definition of “insider” is derived from § 101(28) of the Bankruptcy Code. The definition has been restricted in clauses (i)(C), (ii)(E), and (iii)(D) (clauses (a)(III), (b)(V), and (c)(IV) in C.R.S.), to make clear that a partner is not an insider of an individual, corporation, or partnership if any of these latter three persons is only a limited partner. The definition of “insider” in the Bankruptcy Code does not purport to make a limited partner an insider of the partners or of the partnership with which the limited partner is associated, but it is susceptible of a contrary interpretation and one which would extend unduly the scope of the defined relationship when the limited partner is not a person in control of the partnership. The definition of “insider” in this Act also differs from the definition in the Bankruptcy Code in omitting the reference in 11 U.S.C. § 101(28)(D) to an elected official or relative of such an official as an insider of a municipality. As in the Bankruptcy Code (see 11 U.S.C. § 102(3)), the word “includes” is not limiting, however. Thus, a court may find a person living with an individual for an extended time in the same household or as a permanent companion to have the kind of close relationship intended to be covered by the term “insider.” Likewise, a trust may be found to be an insider of a beneficiary.    The definition of “lien” is derived from paragraphs (30), (31), (43), and (45) of § 101 of the Bankruptcy Code, which define “judicial lien,” “lien,” “security interest,” and “statutory lien” respectively.    The definition of “person” is adapted from paragraphs (28) and (30) of § 1-201 of the Uniform Commercial Code, defining “organization” and “person” respectively.    The definition of “property” is derived from § 1-201(33) of the Uniform Probate Code (see section 15-10-201 (36) in C.R.S.). Property includes both real and personal property, whether tangible or intangible, and any interest in property, whether legal or equitable.    The definition of “relative” is derived from § 101(37) of the Bankruptcy Code but is explicit in its references to the spouse of a debtor in view of uncertainty as to whether the common law determines degrees of relationship by affinity.    The definition of “transfer” is derived principally from § 101(48) of the Bankruptcy Code. The definition of “conveyance” in § 1 of the Uniform Fraudulent Conveyance Act was similarly comprehensive, and the references in this Act to “payment of money, release, lease, and the creation of a lien or incumbrance” are derived from the Uniform Fraudulent Conveyance Act. While the definition in the Uniform Fraudulent Conveyance Act did not explicitly refer to an involuntary transfer, the decisions under that Act were generally consistent with an interpretation that covered such a transfer. See, e.g., Hearn 45 St. Corp. v. Jano, 283 N.Y. 139, 27 N.E.2d 814, 128 A.L.R. 1285 (1940) (execution and foreclosure sales); Lefkowitz v. Finkelstein Trading Corp., 14 F.Supp. 898, 899 (S.D.N.Y. 1936) (execution sale); Langan v. First Trust & Deposit Co., 277 App.Div. 1090, 101 N.Y.S.2d 36 (4th Dept. 1950), aff'd, 302 N.Y. 932, 100 N.E.2d 189 (1951) (mortgage foreclosure); Catabene v. Wallner, 16 N.J.Super. 597, 602, 85 A.2d 300, 302 (1951) (mortgage foreclosure).    The definition of “valid lien” is new. A valid lien includes an equitable lien that may not be defeated by a judicial lien creditor. See, e.g., Pearlman v. Reliance Insurance Co., 371 U.S. 132, 136 (1962) (upholding a surety's equitable lien in respect to a fund owing a bankrupt contractor).     Subparagraphs (i), (ii), and (iii) (paragraph (a), (b), and (c) in C.R.S.) provide clarification by excluding from the term not only generally exempt property but also an interest in a tenancy by the entirety in many states and an interest that is generally beyond reach by unsecured creditors because subject to a valid lien. This Act, like its predecessor and the Statute of 13 Elizabeth, declares rights and provides remedies for unsecured creditors against transfers that impede them in the collection of their claims. The laws protecting valid liens against impairment by levying creditors, exemption statutes, and the rules restricting levyability of interest in entireties property are limitations on the rights and remedies of unsecured creditors, and it is therefore appropriate to exclude property interests that are beyond the reach of unsecured creditors from the definition of “asset” for the purposes of this Act.   A creditor of a joint tenant or tenant in common may ordinarily collect a judgment by process against the tenant's interest, and in some states a creditor of a tenant by the entirety may likewise collect a judgment by process against the tenant's interest. See 2 American Law of Property 10, 22, 28-32 (1952); Craig, An Analysis of Estates by the Entirety in Bankruptcy, 48 Am.Bankr.L.J. 255, 258-59 (1974). The levyable interest of such a tenant is included as an asset under this Act.   The definition of “assets” in the Uniform Fraudulent Conveyance Act excluded property that is exempt from liability for debts. The definition did not, however, exclude all property that cannot be reached by a creditor through judicial proceedings to collect a debt. Thus, it included the interest of a tenant by the entirety although in nearly half the states such an interest cannot be subjected to liability for a debt unless it is an obligation owed jointly by the debtor with his or her cotenant by the entirety. See 2 American Law of Property 29 (1952); Craig, An Analysis of Estates by the Entirety in Bankruptcy, 48 Am.Bankr.L.J. 255, 258 (1974). The definition in this Act requires exclusion of interests in property held by tenants by the entirety that are not subject to collection process by a creditor without a right to proceed against both tenants by the entirety as joint debtors.   The reference to “generally exempt” property in § 1(2)(ii) (numbered as section 38-8-102 (2)(b) in C.R.S.) recognizes that all exemptions are subject to exceptions. Creditors having special rights against generally exempt property typically include claimants for alimony, taxes, wages, the purchase price of the property, and labor or materials that improve the property. See Uniform Exemptions Act § 10 and the accompanying Comment. The fact that a particular creditor may reach generally exempt property by resorting to judicial process does not warrant its inclusion as an asset in determining whether the debtor is insolvent.   Since this Act is not an exclusive law on the subject of voidable transfers and obligations (see Comment (8) to § 4 infra) (numbered as section 38-8-105 in C.R.S.), it does not preclude the holder of a claim that may be collected by process against property generally exempt as to other creditors from obtaining relief from a transfer of such property that hinders, delays, or defrauds the holder of such a claim. Likewise the holder of an unsecured claim enforceable against tenants by the entirety is not precluded by the Act from pursuing a remedy against a transfer of property held by the entirety that hinders, delays, or defrauds the holder of such a claim.   Nonbankruptcy law is the law of a state or federal law that is not part of the Bankruptcy Code, Title 11 of the United States Code. The definition of an “asset” thus does not include property that would be subject to administration for the benefit of creditors under the Bankruptcy Code unless it is subject under other applicable law, state or federal, to process for the collection of a creditor's claim against a single debtor.   ANNOTATION   “Creditor” includes persons with unlitigated claims against a defendant. Sands v. New Age Family P'ship, Ltd., 897 P.2d 917 (Colo. App. 1995).   The general assembly restricted the definition of “insider” under this act by substituting the word “means” in place of the word “includes” in the uniform act. Although the general assembly chose to change only one word--switching the word “includes” to “means”--the change in verbs has substantive implications. The terms “means” and “includes” are not necessarily synonymous. The natural distinction would be that where “means” is employed, the term and its definition are to be interchangeable equivalents, and that the verb “includes” imports a general class, some of whose particular instances are those specified in the definition. In re Blair, 594 B.R. 712 (Bankr. D. Colo. 2018 ).   Under the plain meaning of subsection (8), the term “insider” is restricted exclusively to those narrow categories of persons that are listed. The first category includes a “relative of the debtor”. In re Blair, 594 B.R. 712 (Bankr. D. Colo. 2018 ).   A fiance does not qualify as a “relative of the debtor”. In re Blair, 594 B.R. 712 (Bankr. D. Colo. 2018 ).   “Insider” includes spouses; therefore, the burden of proof lies with the creditor to prove each and every element of a fraudulent transfer under the statute before the debtor and spouse must come forward to prove their entitlement to the defense of good faith and reasonably equivalent value. In re Thomason, 202 B.R. 768 (Bankr. D. Colo. 1996 ).   “Obligation,” not specifically defined in this section, is generally synonymous with “transfer” and includes the assumption by the debtor of a duty to transfer an asset as a fraudulent transfer, even though no actual transfer has as yet taken place. Sands v. New Age Family P'ship, Ltd., 897 P.2d 917 (Colo. App. 1995).   Neither “transfer” nor “obligation” refers to the creditor's claim against the debtor, but refers instead to the transaction by which the debtor sought to place assets beyond the reach of creditors. Sands v. New Age Family P'ship, Ltd., 897 P.2d 917 (Colo. App. 1995).   A transaction between a husband and wife is presumptively fraudulent. Nevertheless, the movant must still establish an intent to hinder, delay, or defraud. Krol v. Unglaub, 332 B.R. 303 (Bankr. N.D. Ill. 2005).   Debtor's transfers to his fiance and her company were not fraudulent transfers to an insider. Because the fianc had not married debtor, she did not qualify as a relative. Nor was the company she owned a relative of the debtor. In re Blair, 594 B.R. 712 (Bankr. D. Colo. 2018 ).   As to the other exclusive categories of “insiders” listed in subsection (8), neither the fiance nor her company qualified as “insiders” because neither was: (1) a partnership in which the debtor was a general partner; (2) a general partner in such a partnership; or (3) a corporation of which the debtor was a director, officer, or person in control. In re Blair, 594 B.R. 712 (Bankr. D. Colo. 2018 ).   Applied in Wilson v. Pauling, 457 F. Supp. 3d 965 (D. Colo. 2020 ).