Trustee Powers and Prepetition Transfers

Pursuant to 11 U.S.C. § 548(a)(1)(B) the trustee can avoid certain transfers made within two years before the petition filing date.

Section 548(a)(1)(B) in pertinent part, provides: 

• if the debtor received less a reasonably equivalent value in exchange for such transfer or obligation and,
  (I)  was insolvent on the date that such transfer was made . . ., or became insolvent as a result of such transfer . . .;
  

(III) intended to incur, or believed that the debtor would incur, debts that would be beyond the debtor's ability to pay as such debts matured.

(IV) made such a transfer to or for the benefit of an insider, or incurred such obligation to or for the benefit of an insider….

The bankruptcy objective of the avoidance powers in Section 548 is to protect creditors from prejudice resulting from transfers of the debtor’s property for less than fair consideration, resulting in diminution of the debtor’s estate available to the pay creditors. Transfers of assets and sale or assets can be a point of contention in bankruptcy cases.

This is especially true when a debtor does not think they have any interest in the asset. For example: debtor’s friend purchases a vehicle but titles the vehicle in the debtor’s name. The vehicle is paid for by the debtor’s friend. Years later, debtor’s friend decides to give the vehicle to his daughter and asks the debtor to sign over the title to his daughter and no money is exchanged. Six months later, debtor files for bankruptcy. Is this a fraudulent transfer that may be avoidable by the trustee-it is a good possibility, it will be avoided. The purpose of the fraudulent transfer law is to prevent harm to creditors by a transfer of property by the debtor. If the vehicle transferred by the debtor was worth $10,000 and the debtor received nothing in exchange for the transfer, this transfer would diminish the debtor’s estate.

The purpose of section 548 is to protect the estate itself for the benefit of the creditors.

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The law makes available to creditors those assets of the debtor that are rightfully a part of the bankruptcy estate, even if they have been transferred away. Contact the attorneys at LifeBackLaw and see us at www.LifeBackLaw.com  and let us help you get your life back.