Fraudulent Transfers & Avoidance Actions Flashcards

Under the Bankruptcy Code, what is the standard look-back period for avoiding fraudulent transfers made to non-insiders?

Answer: 2 years before the bankruptcy filing

Section 548 of the Bankruptcy Code allows trustees to avoid fraudulent transfers made within 2 years before the petition date.

Which of the following elements must a trustee prove to avoid a transfer as an 'actual' fraudulent transfer under Section 548?

Answer: The debtor made the transfer with actual intent to hinder, delay, or defraud creditors

Actual fraudulent transfer requires proving the debtor's intent to hinder, delay, or defraud creditors, which distinguishes it from constructive fraudulent transfer.

A 'constructive' fraudulent transfer under Section 548 requires proof that the debtor received less than reasonably equivalent value AND which of the following?

Answer: The debtor was insolvent, undercapitalized, or unable to pay debts as they came due

Constructive fraud under Section 548 requires both inadequate consideration and one of three financial conditions: insolvency, unreasonably small capital, or inability to pay debts.

Under Section 544 of the Bankruptcy Code, the trustee is granted the 'strong arm' powers of which party?

Answer: A hypothetical lien creditor, judgment creditor, and bona fide purchaser of real property

Section 544 gives the trustee the powers of a hypothetical lien creditor, judgment creditor, and bona fide purchaser, allowing avoidance of unperfected security interests.

A debtor transfers property to a creditor on account of an antecedent debt while insolvent, 45 days before filing bankruptcy. This transfer is most likely avoidable as a:

Answer: Preferential transfer under Section 547

A transfer to a creditor for a pre-existing debt while insolvent within 90 days of filing meets the elements of a preferential transfer under Section 547.

Which 'badges of fraud' is most commonly cited as evidence of actual fraudulent intent in transfer avoidance litigation?

Answer: The transfer was made to an insider shortly before filing bankruptcy

Transfers to insiders (family members, business partners) shortly before bankruptcy are classic badges of fraud indicating intent to hinder creditors.

If a trustee successfully avoids a transfer under Section 548, what remedy is typically available under Section 550?

Answer: The trustee may recover the property transferred or its value from the transferee

Section 550 allows the trustee to recover the transferred property itself or its monetary equivalent from the initial transferee or certain subsequent transferees.