DOCSLIB.ORG

Preferences and Fraudulent Transfers

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text

Load more

PREFERENCES AND FRAUDULENT TRANSFERS David B. Young [email protected] McGINNIS, LOCHRIDGE & KILGORE, L.L.P. 1300 Capitol Center 919 Congress Avenue Austin, Texas 78701 (512) 495-6000 (512) 505-6370 FAX Prepared for the Practising Law Institute 27th Annual Current Developments in Bankruptcy and Reorganization New York and San Francisco, 2005 Copyright © 2005 David B. Young All Rights Reserved © International Insolvency Institute - www.iiiglobal.org TABLE OF CONTENTS I. THE NATURE AND COMMON FEATURES OF PREFERENCE AND FRAUDULENT TRANSFER AVOIDANCE ACTIONS................................................1 A. Preferences and Fraudulent Transfers Compared..................................................1 B. The Debtor Must Have Had an Interest in the Property Transferred That Would Have Been Available to Creditors.....................................................9 1. Only a Prepetition Transfer of an Interest of the Debtor in Property Is Subject to Postpetition Avoidance. .........................................9 2. Assets That the Debtor Holds in Trust. ................................................... 10 3. Escrow Funds......................................................................................... 15 4. The Earmarking Doctrine. ...................................................................... 16 5. Prepetition Disclaimers of Bequests, Devises, or Inheritances. ............... 18 6. Interspousal Transfers of Property Held by the Entirety.......................... 27 7. Observing Corporate Forms: Property of the Corporation and Property of the Equity Owner................................................................. 33 C. There Must Have Been a Transfer...................................................................... 34 D. Standing to Bring a Fraudulent Transfer or Preference Action............................ 39 1. Trustees, Debtors-in-Possession, and Individual Debtors........................ 39 2. Granting Derivative Standing to a Committee or Individual Creditors. ............................................................................................... 41 3. Individual Creditors Seeking Avoidance on Their Own Behalf............... 44 4. Assignment of and Succession to Avoidance Actions. ............................ 45 5. Special Requirements for Standing under 11 U.S.C. § 544(b)................. 48 E. Time for Bringing a Preference or Fraudulent Transfer Claim............................ 49 1. A Split of Authority Resolved by the Bankruptcy Reform Act of 1994................................................................................................... 49 2. 11 U.S.C. § 546(a): Jurisdictional or a Mere Statute of Limitations? ........................................................................................... 52 i © International Insolvency Institute - www.iiiglobal.org F. The Nature of Recovery and the Parties Liable................................................... 54 1. The Distinction Between Avoidance and Recovery. ............................... 54 2. Parties Who May Be Liable for Recovery: 11 U.S.C. § 550(a)..................................................................................................... 55 3. The Right to Recovery Ends with a Subsequent Good Faith Transferee for Value: 11 U.S.C. § 550(b). ............................................. 59 4. Lien Protection for a Good Faith Transferee Who May Be Liable for Recovery: 11 U.S.C. § 550(e)................................................ 62 II. PREFERENCE ACTIONS UNDER 11 U.S.C. § 547 AND STATE LAW .................... 63 A. Elements of a Preference Claim under 11 U.S.C. § 547(b). ................................ 63 1. Transfer to or for the Benefit of a Creditor: 11 U.S.C. § 547(b)(1)............................................................................................. 64 2. Transfer for or on Account of an Antecedent Debt: 11 U.S.C. § 547(b)(2)............................................................................................. 66 3. Transfer Made While the Debtor Was Insolvent: 11 U.S.C. § 547(b)(3)............................................................................................. 68 4. Reachback Period for Preference Avoidance: 11 U.S.C. § 547(b)(4)............................................................................................. 71 5. The Creditor Must Have Received More Than It Would Have Received in a Chapter 7 Liquidation: 11 U.S.C. § 547(b)(5). ................. 75 B. Defenses to a Preference Claim under 11 U.S.C. § 547(c).................................. 78 1. Contemporaneous Exchange for New Value: 11 U.S.C. § 547(c)(1). ............................................................................................ 78 2. Ordinary Course of Business: 11 U.S.C. § 547(c)(2).............................. 83 (a) Introduction. ............................................................................... 83 (b) Debt Incurred in the Ordinary Course of Business or Financial Affairs: 11 U.S.C. § 547(c)(2)(A). .............................. 84 (c) Transfer Made in the Ordinary Course of Business or Financial Affairs: 11 U.S.C. § 547(c)(2)(B). .............................. 88 (d) Transfer Made According to Ordinary Business Terms: 11 U.S.C. § 547(c)(2)(C). ........................................................... 91 - ii - © International Insolvency Institute - www.iiiglobal.org (e) Proposed Changes in the Ordinary Course of Business Defense....................................................................................... 95 3. Purchase Money Security Interests and the Enabling Loan Defense: 11 U.S.C. § 547(c)(3).............................................................. 96 4. Subsequent Unsecured Advances: 11 U.S.C. § 547(c)(4)..................... 101 5. No Net Improvement for the Holder of a Floating Lien on Inventory and Receivables: 11 U.S.C. § 547(c)(5). .............................. 104 6. Fixing of a Statutory Lien: 11 U.S.C. § 547(c)(6). ............................... 107 7. Alimony, Maintenance, and Support: 11 U.S.C. § 547(c)(7). ............... 108 8. Small Transfers: 11 U.S.C. § 547(c)(8)................................................ 110 9. A Proposed Minimum for Nonconsumer Preference Actions. ............... 111 C. The Insider Preference Provisions of the Uniform Fraudulent Transfer Act................................................................................................................... 112 1. Nature and Elements of an Insider Preference Claim. ........................... 112 2. Reachback Period and Time to Sue....................................................... 115 3. Defenses to an Insider Preference Claim............................................... 116 D. The Deprizio Problem...................................................................................... 118 1. Deprizio and Its Progeny. ..................................................................... 118 2. Statutory and Contractual Solutions to Deprizio. .................................. 120 3. Continuing Problems and Proposed Legislation.................................... 123 III. FRAUDULENT TRANSFER AVOIDANCE.............................................................. 128 A. General Considerations.................................................................................... 128 1. Bases for Fraudulent Transfer Actions.................................................. 128 2. Reachback Period for Avoiding a Fraudulent Transfer.......................... 132 B. Transfers Made with Actual Intent to Hinder, Delay, or Defraud Creditors.......................................................................................................... 135 1. Standard of Proof. ................................................................................ 135 - iii - © International Insolvency Institute - www.iiiglobal.org 2. Determining Actual Intent: Badges of Fraud........................................ 137 C. Constructively Fraudulent Transfers. ............................................................... 142 1. Less Than Reasonably Equivalent Value: A Necessary, but Not a Sufficient, Condition for Avoidance: 11 U.S.C. § 548(a)(1)(B)(i). ................................................................................. 142 (a) The Importance of Reasonably Equivalent Value...................... 142 (b) Determining Whether the Debtor Received Value..................... 143 (c) Determining Reasonable Equivalence. ...................................... 146 2. Transfers by an Insolvent Debtor: 11 U.S.C. § 548(a)(1)(B)(ii)(I).............................................................................. 153 3. Transfers Leaving the Debtor With Unreasonably Small Capital: 11 U.S.C. § 548(a)(1)(B)(ii)(II). ............................................. 155 4. Transfers in Anticipation of Incurring Debts Beyond the Debtor’s Ability to Pay: 11 U.S.C. § 548(a)(1)(B)(ii)(III).................... 157 D. The Good Faith Purchaser Defense: 11 U.S.C. § 548(c). ................................. 158 E. Dealing With Conversions of Nonexempt to Exempt Property As Fraudulent Transfers. ....................................................................................... 162 F. Foreclosures and Similar Transactions As Constructively Fraudulent Transfers.......................................................................................................... 169 1. Reasonably Equivalent Value and Real Estate Foreclosures: Durrett and Its Progeny. ......................................................................
Recommended publications
  • Asset Protection Planning (With Audit Checklist)

    Asset Protection Planning (With Audit Checklist)

    Asset Protection Planning (With Audit Checklist) Gideon Rothschild A. Introduction 1. Litigation environment creates greater exposure to risk of loss. a. Expanded theories of liability (such as McDonald’s coffee spill); b. Higher jury awards; c. Unpredictable judges. 2. Traditional forms of protection have become inadequate. a. Insurance: i. Exclusions; ii. Policy limits; iii. Solvency of insurer; iv. Policy lapses. b. Incorporation: i. Piercing corporate veil; ii. Shareholder and officer liability. 3. Candidates For Asset Protection Planning a. Professionals; Gideon Rothschild, J.D., CPA, is with Moses & Singer LLP, in New York, New York. ALI-ABA Estate Planning Course Materials Journal | 25 26 | ALI-ABA Estate Planning Course Materials Journal April 2009 b. Officers, directors, and fiduciaries; c. Real estate owners with exposure to environmental claims; d. Individuals exposed to lawsuits arising from claims alleging negligent acts, intentional torts (dis- crimination, harassment, and libel), or contractual claims; e. Prenuptial alternative. 4. Asset protection concepts are not new: a. Incorporation of business activities; b. Formation of LLCs, LLPs, and LPs; c. Offshore trusts used traditionally to avoid forced heirship or government expropriation; d. Exemption and pre-bankruptcy planning. 5. Asset protection is part of an overall wealth preservation process, including: a. Investment diversification; b. Insurance adequacy; c. Income tax planning; d. Estate tax planning; e. Wealth protection. B. Fraudulent Conveyance Issues 1. Law Varies By Jurisdiction. Transfers proper in one state may be held improper elsewhere, but certain gener- ally accepted principles govern creditors. Common law usually divides creditors into three categories: a. Present Creditors. Those persons of whom the transferor has notice when making transfers.
  • Website Profit

    Website Profit

    Website Profit Erfolg mit Partnerprogrammen: Mehrwert und Geldquelle für die eigene Website center.de - marketing - www.affiliate ADENION NetSeller Der ADENION NetSeller „Website Profit“ ist urheberrechtlich geschützt. © Copyright 2002, 2005 ADENION GmbH. Alle Rechte vorbehalten. Autoren: Melanie Tamblé, Andreas Winkler Herausgeber: ADENION GmbH, Grevenbroich, Germany Diese Publikation darf weder ganz oder in Teilen auf irgendeine Form vervielfältigt oder reproduziert werden. Dies gilt auch für das Speichern oder die Weiterleitung auf Datenträger oder andere Speichermedien. Abdruckgenehmigungen beim Herausgeber: ADENION GmbH Merkatorstrasse 2 41515 Grevenbroich Fon: 02181/7569-140 Fax: 02181/7569-199 E-Mail: [email protected] 1. Auflage, Februar 2002 2. überarbeitete und aktualisierte Auflage, Februar 2005 Die Informationen dieses Buches wurden sorgfältig recherchiert und aufbereitet. Es können keinerlei Garantien für die Richtigkeit der Informationen gegeben werden. Weder die Autoren noch der Her- ausgeber übernehmen irgendwelche Haftungen für Fehler, Auslassungen oder anderweitige Auslegun- gen der dargestellten Themen und Sachverhalte. Aussagen und Darstellungen über Zahlen, Kosten, Konditionen oder Leistungen von Drittanbietern basieren auf Informationen und Angaben zum Zeitpunkt der Erstellung dieses Leitfadens. Es kann keine Garantie für die Richtigkeit dieser Informationen gemacht werden. Sie unterliegen ausschließ- lich den Geschäftsbestimmungen und Rechten der jeweiligen Unternehmen. Alle in diesem Buch erwähnten Domainnamen,
  • Midwinter 2005 ISSN 1534-0937 Walt Crawford

    Midwinter 2005 ISSN 1534-0937 Walt Crawford

    Cites & Insights Crawford at Large Libraries • Policy • Technology • Media Sponsored by YBP Library Services Volume 5, Number 2: Midwinter 2005 ISSN 1534-0937 Walt Crawford $20-$25 of 256MB for $40-$50 may be more Trends & Quick Takes typical. With XP computers typically having front-mounted USB slots, the primary setup The Hazy Crystal Ball requirement is security. It’s that time of year—time for pundits and gurus to ¾ Wireless Access: “Providing wireless access tell us what’s to come and for a few of them to spin frees up your public access computing termi- last year’s projections. nals for those who truly need them, and I was going to include snarky comments (or cred- makes your library the neighborhood ‘hot- its, when applicable) about last year’s forecasts—but I spot’ for information access.” see that last year got so confusing that I never ran a ¾ Thin Clients::: “Thin-client technology en- set of forecasts. Neither did I make one: That should ables you to extend the life of your existing be no surprise. computers, lower costs on expanding the number of patron terminals, and simplify WebJunction’s Emerging technologies maintenance procedures.” for small libraries ¾ Upgrading Your Operating Systems: “Tech- You could think of this as a counterpart to the LITA Soup Stock offers upgrades to Windows XP Top Technology Trends group, but with fewer partici- for $8 (libraries are eligible)…” The text calls pants (eight in the October 4 posting) and a small- Windows 2000 and 95 “antiquated.” library bent. The committee develops a quarterly “list of five technologies they think are worth considering Inside This Issue for your library.” I like the guidelines: “The committee Bibs & Blather....................................................................
  • A Practitioner's Guide to Federal Governmental Creditor Fraudulent

    A Practitioner's Guide to Federal Governmental Creditor Fraudulent

    AVOIDING THE UNAVOIDABLE: A PRACTITIONER’S GUIDE..., 92 Am. Bankr. L.J. 335 92 Am. Bankr. L.J. 335 American Bankruptcy Law Journal Summer, 2018 Article R. Stephen McNeilla1 Copyright © 2018 by the National Conference of Bankruptcy Judges; R. Stephen McNeill *335 AVOIDING THE UNAVOIDABLE: A PRACTITIONER’S GUIDE TO FEDERAL GOVERNMENTAL CREDITOR FRAUDULENT CONVEYANCE ACTIONS I. INTRODUCTION Fraudulent conveyance litigation in bankruptcy cases has intensified in recent years. As part of an enhanced focus on avoidance recoveries, trustees and other estate representatives argue that they should be permitted to avoid transfers that otherwise would be unavoidable under applicable state law by relying on the United States government as an unsecured creditor. This Article analyzes this growing trend and evaluates defenses that may be available to targets of these avoidance actions. II. FRAUDULENT CONVEYANCE ACTIONS UNDER THE BANKRUPTCY CODE Section 548 of the bankruptcy code permits a trustee to avoid an actual or constructive fraudulent conveyance if the transfer was “made or incurred on or within 2 years before the date of the filing of the petition.”1 Given the relatively short look-back period2 under § 548, trustees typically look to § 544(b) to bring fraudulent conveyance actions under state law. Section 544(b) permits a trustee to “avoid any transfer of an interest of the debtor in property or any obligation incurred by the debtor that is voidable under applicable law by a creditor holding an unsecured claim that is allowable only *336 under
  • Changes to the Uniform Fraudulent Transfer Act Approved Author

    Changes to the Uniform Fraudulent Transfer Act Approved Author

    Insolvency & Restructuring - USA Changes to the Uniform Fraudulent Transfer Act approved Author Contributed by Caplin & Drysdale, Chartered Andrew J Sackett October 10 2014 Introduction Change of name Choice of law Evidentiary matters Defences Other changes Introduction In July 2014 the Uniform Law Commission(1) approved changes to the Uniform Fraudulent Transfer Act, including a change in title to the Uniform Voidable Transactions Act.(2) The Uniform Fraudulent Transfer Act was itself a 1984 revision of the 1918 Uniform Fraudulent Conveyance Act, a codification of certain decisions applying the Statute of 13 Elizabeth.(3) The Uniform Fraudulent Transfer Act was adopted in 43 states and the District of Columbia;(4) the most notable exception is New York, which maintains a statute based on the Uniform Fraudulent Conveyance Act. The Uniform Voidable Transactions Act (like its predecessors) declares rights and provides remedies under state law for unsecured creditors against transactions that impede them in the collection of their claims.(5) It therefore provides that creditors can void transfers made or obligations incurred by debtors under various circumstances, including: l if the debtor at issue made the transfer or incurred the obligation with the intent of hindering, delaying or defrauding any creditor; or l if the debtor did not receive a reasonably equivalent value in exchange for the transfer or obligation and, after the transaction, was insolvent, was left with insufficient assets to operate its business or was unable to pay its
  • Restructuring & Insolvency

    Restructuring & Insolvency

    GETTING THROUGH THE DEAL Restructuring & Insolvency Restructuring & Insolvency Restructuring Contributing editor Bruce Leonard 2017 2017 © Law Business Research 2016 Restructuring & Insolvency 2017 Contributing editor Bruce Leonard The International Insolvency Institute Publisher Law The information provided in this publication is Gideon Roberton general and may not apply in a specific situation. [email protected] Business Legal advice should always be sought before taking Research any legal action based on the information provided. Subscriptions This information is not intended to create, nor does Sophie Pallier Published by receipt of it constitute, a lawyer–client relationship. [email protected] Law Business Research Ltd The publishers and authors accept no responsibility 87 Lancaster Road for any acts or omissions contained herein. The Senior business development managers London, W11 1QQ, UK information provided was verified between Alan Lee Tel: +44 20 3708 4199 September and October 2016. Be advised that this is [email protected] Fax: +44 20 7229 6910 a developing area. Adam Sargent © Law Business Research Ltd 2016 [email protected] No photocopying without a CLA licence. Printed and distributed by First published 2008 Encompass Print Solutions Dan White Tenth edition Tel: 0844 2480 112 [email protected] ISSN 2040-7408 © Law Business Research 2016 CONTENTS Global overview 7 Cyprus 129 Richard Tett Lia Iordanou Theodoulou, Angeliki Epaminonda
  • Supreme Court Closes Safe Harbor Loophole in Fraudulent Conveyance Litigation

    Supreme Court Closes Safe Harbor Loophole in Fraudulent Conveyance Litigation

    Supreme Court Closes Safe Harbor Loophole in Fraudulent Conveyance Litigation In a much anticipated decision, Merit Management Group, LP v. FTI Consulting, Inc., the Supreme Court has paved the way for bankruptcy estates, through litigation, to claw back value from shareholders and other participants that benefitted from pre-bankruptcy leveraged buyouts and other transactions, eliminating a safe harbor that formerly stifled such litigation. Section 548 of the Bankruptcy Code allows trustees and debtors-in-possession to undo certain pre-bankruptcy transfers – known as “constructive fraudulent conveyances” – for which the debtor received less than a “reasonably equivalent value” and which were made when the debtor was insolvent. Participants in leveraged buyouts and other transactions were previously able to escape the threat of clawback under Section 548 by virtue of Section 546(e) of the Bankruptcy Code, which prescribes a safe harbor exception shielding transfers that were “made by or to (or for the benefit of) a . financial institution.” The majority of Courts of Appeals – including the Second and Third Circuits – had held that Section 546(e) covered transactions where a financial institution, such as a bank, acted as a “mere conduit” in the transaction. Accordingly, shareholders and other parties were able to participate in leveraged buyouts with impunity, relying on the fact that financial institutions would typically act as an intermediaries in the transactions – for example, by facilitating the transfer of funds from the new to the old owners of the company. The Supreme Court has now foreclosed this expansive interpretation of Section 546(e), dramatically changing the landscape of bankruptcy and creditors’ rights law and opening up additional opportunities for an estate and its constituents to recapture lost value.1 Merit involved Valley View, an aspiring racetrack casino that bought out shareholders of rival racetrack Bedford Downs in return for Bedford’s withdrawal from a competition for a harness-racing license.
  • Clawbacks in Insolvency 9 September 2019 Fraudulent Preferences and Conveyances Under the Bermuda Companies Act 1981

    Clawbacks in Insolvency 9 September 2019 Fraudulent Preferences and Conveyances Under the Bermuda Companies Act 1981

    Global Legal and Professional Services ADVISORY Industry Information Clawbacks in Insolvency 9 September 2019 Fraudulent Preferences and Conveyances under the Bermuda Companies Act 1981 Creditors should exercise caution when negotiating payment terms, asset transfers or securitisation transactions with companies which are in the zone of insolvency. Such transactions are vulnerable to being set aside by liquidators or by other creditors in the event of the insolvency of the company. The purpose of Bermuda’s reviewable transactions law is to uphold the pari passu basis for the distribution of a company’s assets amongst its unsecured creditors in an insolvency context. Zone of Insolvency In normal circumstances, when a company is in good financial health, a director’s primary duty is to act in the best interests of the company by promoting shareholder value in the company. However, when a company is insolvent, or is in the “zone of insolvency”, this duty shifts such that a director is obliged to instead have primary regard to the interests of the creditors. This is because in an insolvency context, it is the creditors who have an economic interest in the company, rather than the shareholders. So how does one determine when a company is in the “zone of insolvency”? There is no simple answer to this question and there is no bright line test which can be applied to ascertain whether a company is or is not in the zone of insolvency. As a general proposition, the “zone of insolvency” can be thought of as the period where there has been a serious deterioration of a company’s financial position, to the point where there is a reasonable expectation that insolvency has become imminent.
  • Avoiding Fraudulent Transfers

    Avoiding Fraudulent Transfers

    AVOIDING FRAUDULENT TRANSFERS ©2002 Vedder, Price, Kaufman & Kammholz. All rights reserved. CHICAGO/#894244.4 I. INTRODUCTION “The delightful quality of fraud lies in its infinite variety.…”1 The concept of a “fraudulent transfer or conveyance” has its roots in 16th century British law, the Statute of 13 Elizabeth, Chapter 5 (1570). As one modern court noted, “The [Statute of Elizabeth] was aimed at a practice by which overburdened debtors placed their assets in friendly hands thereby frustrating creditors’ attempts to satisfy their claims against the debtor,” only to have the assets returned to the debtor after the creditors had given up their collection efforts.2 Current restrictions on such efforts to defraud creditors are embodied in both federal and state law. Modern fraudulent conveyance law includes both traditional actual fraud, where the company acts with the intent to hinder, delay or defraud its creditors, and a broader concept of constructive fraud, where the financially strapped company engages in transactions that result in a transfer of assets in exchange for something less than the reasonably equivalent value of those assets. Lenders should be aware of the elements of fraudulent transfer in order to avoid the potential risks associated therewith, particularly with loans related to leveraged buyouts and intercompany guarantees. II. FRAUDULENT TRANSFERS UNDER THE BANKRUPTCY CODE AND APPLICABLE STATE LAW A. Trustee or Debtor in Possession’s Avoiding Powers Generally 1. Sections 542-553 of the Bankruptcy Code grant a Debtor in Possession or Trustee the power to “avoid” certain transfers and recover assets for the benefit of the bankruptcy estate, including transfers that “prefer” one creditor over another and fraudulent transfers.
  • 20-1333, 20-1334 in Re Bernard L. Madoff Inv. Sec. LLC UNITED STATES COURT of APPEALS for the SECOND CIRCUIT ______

    20-1333, 20-1334 in Re Bernard L. Madoff Inv. Sec. LLC UNITED STATES COURT of APPEALS for the SECOND CIRCUIT ______

    20-1333, 20-1334 In Re Bernard L. Madoff Inv. Sec. LLC UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT ______________ August Term 2020 (Argued in Tandem: March 12, 2021 | Decided: August 30, 2021) Docket Nos. 20-1333, 20-1334 IN RE: BERNARD L. MADOFF INVESTMENT SECURITIES LLC ______________ IRVING H. PICARD, TRUSTEE FOR THE LIQUIDATION OF BERNARD L. MADOFF INVESTMENT SECURITIES LLC, Plaintiff-Appellant, and SECURITIES INVESTOR PROTECTION CORPORATION, Appellant, v. CITIBANK, N.A., CITICORP NORTH AMERICA, INC., Defendants-Appellees.† ______________ IRVING H. PICARD, TRUSTEE FOR THE LIQUIDATION OF BERNARD L. MADOFF INVESTMENT SECURITIES LLC, Plaintiff-Appellant, and † The Clerk of Court is respectfully directed to amend the caption as set forth above. SECURITIES INVESTOR PROTECTION CORPORATION, Appellant, v. LEGACY CAPITAL LTD., KHRONOS LLC Defendants-Appellees. ______________ Before: WESLEY, SULLIVAN, MENASHI, Circuit Judges. Plaintiff-Appellant Irving H. Picard was appointed as the trustee for the liquidation of Bernard L. Madoff Investment Securities LLC (“BLMIS”) pursuant to the Securities Investor Protection Act (“SIPA”), 15 U.S.C. §§ 78aaa et seq., to recover funds for victims of Bernard Madoff’s Ponzi scheme. SIPA empowers trustees to recover property transferred by the debtor where the transfers are void or voidable under Sections 548 and 550 of the Bankruptcy Code, 11 U.S.C. §§ 548, 550, to the extent those provisions are consistent with SIPA. Under Sections 548 and 550, a transferee may retain transfers it took “for value” and “in good faith.” Picard brought actions against Defendants-Appellees, Citibank, N.A., Citicorp North America, Inc., Legacy Capital Ltd., and Khronos LLC, to recover payments they received either directly or indirectly from BLMIS.
  • Litigating the Suit to Set Aside a Fraudulent Transfer

    Litigating the Suit to Set Aside a Fraudulent Transfer

    Litigating the Suit to Set 14 Aside a Fraudulent Transfer ANDREW R. SCHWARTZ THOMAS J. KANYOCK Schwartz & Kanyock, LLC Chicago I. Introduction A. [14.1] What Is a “Fraudulent Transfer”? B. [14.2] Parties to the Fraudulent Transfer Action C. The Uniform Fraudulent Transfer Act 1. [14.3] Legislative Intent 2. [14.4] Prior Law II. [14.5] Types of Fraudulent Transfers A. [14.6] Fraud in Fact B. [14.7] Fraud in Law C. [14.8] Preferential Fraudulent Transfers to Insiders III. [14.9] Defenses to Fraudulent Transfer Claims A. Intent 1. [14.10] Fraud in Fact 2. [14.11] Fraud in Law B. Solvency 1. [14.12] Fraud in Fact 2. [14.13] Fraud in Law C. [14.14] Bona Fide Purchaser/Good-Faith Transferee 1. [14.15] Fraud in Fact 2. [14.16] Fraud in Law D. [14.17] Transfers for Value 1. [14.18] Fraud in Fact 2. [14.19] Fraud in Law E. [14.20] Statute of Limitations 1. [14.21] Fraud in Fact 2. [14.22] Fraud in Law F. Tenancy by the Entirety 1. [14.23] Statutory Background 2. [14.24] Initial Caselaw 3. [14.25] August 1997 Amendment to 735 ILCS 5/12-112 4. [14.26] Decisions Construing the 1997 Amendment to 735 ILCS 5/12-112 G. Family Expenses 1. [14.27] Spousal Support Obligations 2. [14.28] Family Expense Statute H. [14.29] Wages 1. [14.30] Wages Are Not Exempt in Illinois 2. [14.31] Wage Garnishment Limitations 3. [14.32] Wienco and California-Peterson 4. [14.33] Statutorily Exempt Property Is Never Automatically Exempted I.
  • Controversial Fraudulent Conveyance Decision in Tousa Reversed

    Controversial Fraudulent Conveyance Decision in Tousa Reversed

    BANKRUPTCY, INSOLVENCY ALERT & RESTRUCTURING News Concerning Recent Bankruptcy Issues ® FEBRUARY 18, 2011 www.cozen.com CONTROVERSIAL FRAUDULENT CONVEYANCE DECISION IN TOUSA REVERSED Neal D. Colton • 215.665.2060 • [email protected] Barry M. Klayman • 302.295.2035 • [email protected] n what has validated lenders’ belief in the propriety of the claims, file for bankruptcy, or settle the claims. TOUSA a parent corporation’s borrowing based in part on the decided to settle the claims, but it needed new financing to Iparent company’s guarantees and assets of its operating do so. The settlement process was in three steps: subsidiaries, the United States District Court for the Southern First, TOUSA caused certain of its subsidiaries (the District of Florida, on February 11, 2011,1 reversed the “Conveying Subsidiaries”) to grant liens on their real controversial Southern District of Florida Bankruptcy Court’s property assets and become obligated to a new group of decision in In re TOUSA, Inc.,2 which dramatically expanded the lenders (the “New Lenders”). powers of a bankruptcy trustee to set aside as a “fraudulent conveyance” payments and guarantees coming from Second, in exchange for the liens and the obligations, operating subsidiaries. In so doing, the District Court rejected the New Lenders provided funds and credit facilities (the the heightened duty of due diligence that the Bankruptcy “New Loans”) to TOUSA. Court required to meet the requirements of the good faith Third, TOUSA used the funds from the New Lenders in defense and rejected the extremely narrow definition of part to satisfy its $421 million debt to the Transeastern “reasonably equivalent value” that the Bankruptcy Court used Lenders.