As under the Bankruptcy Code, this valuation is not a liquidation analysis. The "fair valuation" limitation is almost a modified market price valuation. As stated by Collier with respect to the identical provision in the Bankruptcy Code:
[fair] valuation, in general, will signify the reasonable estimate of what can be realized from the assets by converting them into, or reducing them to cash, under carefully guarded if not idealized conditions.
1 Collier on Bankruptcy ¶ 101.29[4] (15th ed. 1991). See also Emerald Hills Country Club, Inc. v. Hollywood, Inc. (In re Emerald Hills Country Club, Inc.), 32 Bankr. 408, 420-21 (Bankr. S.D. Fla. 1983); Varon v. Trimble, Marshall & Goldman, P.C. (In re Euro-Swiss Int'l Corp.), 33 Bankr. 872, 885 (Bankr. S.D.N.Y. 1983).
As under the Bankruptcy Code, contingent liabilities are counted at a value discounted by the probability that they will mature, In re Xonics Photochemical, Inc., 841 F.2d 198 (7th Cir. 1988), even though under the UFCA they were counted at full face value. Chase Manhattan Bank (N.A.) v. Oppenheim, 109 Misc. 2d 649, 440 N.Y.S.2d 829, 831 (Sup. Ct. 1981); Marine Midland Bank v. Stein, 105 Misc. 2d 768, 770, 433 N.Y.S.2d 325, 327 (Sup. Ct. 1980). The same holds true for contingent assets. See Mellon Bank, N.A. v. Metro Communications, Inc., 945 F.2d 635 (3d Cir. 1991)(court notes that lower court erred in not counting as an asset the debtor's rights of contribution against other guarantors of LBO debt).
(2) Section 2(b) establishes a rebuttable presumption of insolvency from the fact of general nonpayment of debts as they become due. Such general nonpayment is a ground for the filing of an involuntary petition under § 303(h)(1) of the Bankruptcy Code. See also Ind. Code § 26-1-1-201(23), which declares a person to be "insolvent" who "has ceased to pay his debts in the ordinary course of business." This act elevates language from the official comments to the UFTA to the text of the statute in order to make clear the effect of the presumption; this change is not intended to create any variance from the text of the UFTA, and is made in response to existing academic commentary which suggests that without the elevation, a risk exists for non-uniform interpretation. See Shupack, Confusion in Policy and Language in the Uniform Fraudulent Transfer Act, 9 Cardozo L. Rev. 811, 830 n.84 (1987).
The presumption is established in recognition of the difficulties typically imposed on a creditor in proving insolvency in the bankruptcy sense, as provided in subsection (a). See generally Levit, The Archaic Concept of Balance-Sheet Insolvency, 47 Am. Bankr. L.J. 215 (1973). Not only is the relevant information in the possession of a noncooperative debtor but the debtor's records are more often than not incomplete and inaccurate. As a practical matter, insolvency is most cogently evidenced by a general cessation of payment of debts, as has long been recognized by the laws of other countries and is now reflected in the Bankruptcy Code. See Honsberger, Failure to Pay One's Debts Generally as They Become Due: The Experience of France and Canada, 54 Am. Bankr. L.J. 153 (1980); J. MacLachlan, Bankruptcy 13, 63-64, 436 (1956). In determining whether a debtor is paying its debts generally as they become due, the court should look at more than the amount and due dates of the indebtedness. The court should also take into account such factors as the number of the debtor's debts, the proportion of those debts not being paid, the duration of the nonpayment, and the existence of bona fide disputes or other special circumstances alleged to constitute an explanation for the stoppage of payments. The court's determination may be affected by a consideration of the debtor's payment practices prior to the period of alleged nonpayment and the payment practices of the trade or industry in which the debtor is engaged. The case law that has developed under § 303(h)(1) of the Bankruptcy Code has not required a showing that a debtor has failed or refused to pay a majority in number and amount of his or her debts in order to prove general nonpayment of debts as they become due. See, e.g., Hill v. Cargill, Inc. (In re Hill), 8 B.R. 779, 3 C.B.C.2d 920 (Bankr. D. Minn. 1981) (nonpayment of three largest debts held to constitute general nonpayment, although small debts were being paid); In re All Media Properties, Inc., 5 B.R. 126, 6 B.C.D. 586, 2 C.B.C.2d 449 (Bankr. S.D. Tex. 1980) (missing significant number of payments or regularly missing payments significant in amount said to constitute general nonpayment; missing payments on more than 50% of aggregate of claims said not to be required to show general nonpayment; nonpayment for more than 30 days after billing held to establish nonpayment of a debt when it is due); In re Kreidler Import Corp., 4 B.R. 256, 6 B.C.D. 608, 2 C.B.C.2d 159 (Bankr. D. Md. 1980) (nonpayment of one debt constituting 97% of debtor's total indebtedness held to constitute general nonpayment). A presumption of insolvency does not arise from nonpayment of a debt as to which there is a genuine bona fide dispute, even though the debt is a substantial part of the debtor's indebtedness. Cf. 11 U.S.C. § 303(h)(1), as amended by § 426(b) of Public Law No. 98-882, the Bankruptcy Amendments and Federal Judgeship Act of 1984.
(3) Subsection (c) is derived from the definition of partnership insolvency in § 101(32)(B) of the Bankruptcy Code. The definition conforms generally to the definition of the same term in § 2(2) of the UFCA.
(4) Subsection (d) follows the approach of the definition of "insolvency" in § 101(32) of the Bankruptcy Code by excluding from the computation of the value of the debtor's assets any value that can be realized only by avoiding a transfer of an interest formerly held by the debtor or by discovery or pursuit of property that has been fraudulently concealed or removed.
(5) Subsection (e) is new. It makes clear the purpose not to render a person insolvent under this section by counting as a debt an obligation secured by property of the debtor that is not counted as an asset. See also Comments to §§ 1(2) and 2(a) supra.
