CBS Fraudulent Transfers & Avoidance Actions 1

Question 1

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

Accepted Answer

2 years before the bankruptcy filing

Answer

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

Question 2

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

Accepted Answer

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

Answer

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

Question 3

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

Accepted Answer

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

Answer

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

Question 4

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

Accepted Answer

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

Answer

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

Question 5

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:

Accepted Answer

Preferential transfer under Section 547

Answer

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.

(CBS) Certified Bankruptcy Specialist Practice Test

(CBS) Certified Bankruptcy Specialist Practice Test

CBS Fraudulent Transfers & Avoidance Actions 1