CBS Fraudulent Transfers & Avoidance Actions 3

Question 1

Under Section 545, a trustee may avoid a statutory lien if the lien first becomes effective when:

Accepted Answer

The debtor becomes insolvent or fails to meet a financial test

Answer

Section 545 allows avoidance of statutory liens that spring into existence based on insolvency or financial condition tests, as these unfairly prefer certain creditors over others.

Question 2

What is 'reasonably equivalent value' in the context of Section 548 constructive fraudulent transfer analysis?

Accepted Answer

A fair and reasonable approximation of the value of what was transferred, assessed from the perspective of the debtor's estate

Answer

Courts assess reasonably equivalent value from the estate's perspective, looking at whether the debtor received fair economic value in exchange, without requiring exact equivalence.

Question 3

A debtor transfers her home to her daughter for no consideration two years before filing Chapter 7. The trustee avoids the transfer. Which Section is the PRIMARY basis for avoidance?

Accepted Answer

Section 548 (fraudulent transfers)

Answer

A gratuitous transfer (no consideration) to an insider within 2 years of filing is a classic constructive fraudulent transfer avoidable under Section 548.

Question 4

The 'new value' defense to a preference claim under Section 547(c)(4) allows a creditor to offset the preference amount by:

Accepted Answer

New unsecured credit extended after the preferential payment that remains unpaid

Answer

Section 547(c)(4) offsets preference liability by the amount of new unsecured value the creditor provided to the debtor after the preferential payment that has not been repaid.

Question 5

In a preference action, there is a statutory presumption under Section 547(f) that the debtor was insolvent during the:

Accepted Answer

90 days immediately before the date of filing

Answer

Section 547(f) creates a rebuttable presumption of insolvency for the 90-day period before the petition date, shifting the burden to the defendant to prove solvency.

(CBS) Certified Bankruptcy Specialist Practice Test

(CBS) Certified Bankruptcy Specialist Practice Test

CBS Fraudulent Transfers & Avoidance Actions 3