CACI No. 4206. Presumption of Insolvency
Judicial Council of California Civil Jury Instructions (2023 edition)
Download PDF
4206.Presumption of Insolvency
A debtor who is generally not paying [his/her/nonbinary pronoun/its]
debts as they become due, other than because of a legitimate dispute, is
presumed to be insolvent.
In determining whether [name of debtor] was generally not paying [his/
her/nonbinary pronoun/its] debts as they became due, you may consider
all of the following:
(a) The number of [name of debtor]’s debts;
(b) The percentage of debts that were not being paid;
(c) How long those debts remained unpaid;
(d) Whether special circumstances explain any failure to pay the
debts; and
(e) [Name of debtor]’s payment practices before the period of alleged
nonpayment [and the payment practices of [name of debtor]’s
[trade/industry]].
If [name of plaintiff] proves that [name of debtor] was generally not
paying debts as they became due, then you must find that [name of
debtor] was insolvent unless [name of defendant] proves that [name of
debtor] was solvent.
New June 2006; Revised June 2016
Directions for Use
This instruction should be read in conjunction with CACI No. 4203, Constructive
Fraudulent Transfer - Insolvency - Essential Factual Elements, and CACI No. 4205,
Insolvency Explained.
Sources and Authority
• Presumption of Insolvency. Civil Code section 3439.02(b).
• “Subdivision (c) [now subdivision (b)] establishes a rebuttable presumption of
insolvency from the fact of general nonpayment of debts as they become due.
. . . The presumption imposes on the party against whom the presumption is
directed the burden of proving that the nonexistence of insolvency as defined in
subdivision (a) is more probable than its existence.” (Legislative Committee
Comment to Civil Code section 3439.02.)
• “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
1105
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.” (Legislative
Committee Comment to Civil Code section 3439.02.)
Secondary Sources
Ahart, California Practice Guide: Enforcing Judgments & Debts, Ch. 3-C,
Prelawsuit Considerations, ¶ 3:328 (The Rutter Group)
23 California Forms of Pleading and Practice, Ch. 270, Fraudulent Conveyances,
§ 270.42[3][e], [4] (Matthew Bender)
26 California Forms of Pleading and Practice, Ch. 307, Insolvency, § 307.20
(Matthew Bender)
CACI No. 4206 UNIFORM VOIDABLE TRANSACTIONS ACT
1106
© Judicial Council of California.
