What is a voidable transaction?

A voidable transaction is a legal transaction that can be cancelled or reversed due to certain conditions. In Washington, voidable transactions are regulated by Creditors Rights Law. These laws are in place to protect creditors, who are owed money by debtors, from fraud and misrepresentation. A voidable transaction occurs when a debtor enters into an agreement with a creditor, but certain conditions are not met. For example, the agreement could be entered into while the debtor is under duress – when they are coerced or threatened into the agreement – making it voidable. Another way a transaction can become voidable is when misrepresentation occurs. This means that when a debtor misrepresents what they are able to pay, the creditor can cancel and reverse the transaction. For example, if a debtor knowingly lies about their income or assets in order to borrow money, then the creditor is allowed to take back the money once the truth is revealed. A voidable transaction is beneficial for protecting creditors from fraud and ensuring that debtors have the ability to revoke agreement when it was made under duress. Creditors Rights Law in Washington provides guidance and regulation for voidable transactions in order to protect both creditors and debtors.

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