Avoidance and Recovery of Transfers

The bankruptcy trustee may avoid transfers that the debtor made or incurred within two years before the filing of the bankruptcy petition if such transfer was made with actual intent to hinder, delay, or defraud a creditor or the debtor received less than fair market value for the transfer. The trustee then may recover, for the benefit of the estate, the property transferred or the value of such property. 

But what if the transfer is older than two years. The trustee still has the power to avoid and recover via Section 544(b) of the code. Section 544(b) of the Bankruptcy Code provides:

The trustee may 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 under section 502 of this title.

The trustee uses section 544(b) as a conduit to assert state law-based fraudulent conveyance actions in bankruptcy. The trustee is able to use 513.44 of the Minnesota Statutes via 544(b) to reach transfers that are older than the two years prior to the filing of the petition. The statute provides:

A transfer made or obligation incurred by a debtor is voidable as to a creditor, whether the creditor’s claim arose before or after the transfer was made or the obligation was incurred, if the debtor made the transfer or incurred the obligation: 

1. With actual intent to hinder, delay, or defraud any creditor of the debtor; or (2) without receiving reasonably equivalent value in exchange for the transfer or obligation, and the debtor:

1. Intended to incur, or believed or reasonably should have believed that the debtor would incur, debts beyond the debtor’s ability to pay as they became due. 

There is a limit however to the trustee’s reach of transfers. Minnesota’s Uniform Fraudulent Transfers Act has a statute of limitations of six years pursuant to section 541.05. If a transfer is fraudulent under section 513.44, and therefore avoidable by a creditor, the trustee will be able to avoid and recover that transfer if it is within the six years prior to the bankruptcy filing. 

CALL NOW FOR A FREE STRATEGY SESSION FROM A MN BANKRUPTCY LAWYER AT LIFEBACK LAW FIRM 

Fraudulent transfers are no joke when filing bankruptcy and the trustee has the power to avoid and recover these transfers. The timeframe for avoidance and recovery can extend past the two year look back period. Contact the attorneys at LifeBackLaw and see us at www.LifeBackLaw.com and let us help you get your life back.