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BANKRUPTCY CODE § 548 (11 USC § 544)

Fraudulent Transfers And Obligations
JayNote
Section 548 largely sets out the substantive law of fraudulent transfers in bankruptcy, while § 550 sets out the defenses of the transferee and some limitations upon fraudulent transfer actions in bankruptcy.
It is very important to know that in bankruptcy the primary tool for dealing with a debtor's late transfers are the provisions dealing with preferential transfers, in contrast to state law where the primary tool is the UFTA/UVTA and many states do not even have preferential transfer laws. There is an academic question as to whether the U.S. Bankruptcy Code should even have its own fraudulent transfer laws, since state fraudulent transfer laws are almost always used by bankruptcy trustees and creditors anyway. As Prof. Ken Kettering, Reporter for the UVTA, has remarked: "Since the primary weapon in bankruptcy is preferential transfer law, and much better developed state fraudulent transfer law is also available, the bankruptcy code's fraudulent transfer provisions are simply a luxury, akin to leather bucket seats."

(a)

(1) The trustee may avoid any transfer (including any transfer to or for the benefit of an insider under an employment contract) of an interest of the debtor in property, or any obligation (including any obligation to or for the benefit of an insider under an employment contract) incurred by the debtor, that was made or incurred on or within 2 years before the date of the filing of the petition, if the debtor voluntarily or involuntarily—
JayNote
The limitations period for a fraudulent transfer in bankruptcy is only two years, as opposed to a four year extinguishment period under state voidable transactions law, and which is why state voidable transactions law is often used in lieu of § 548. However, if the debtor makes the (very common) mistake of listing a tax debt to the United States, the effective limitations period may be as long as ten years, per In re Kipnis, 2016 WL 4543772 (Bk.S.D.Fla., 2016).
(A) made such transfer or incurred such obligation with actual intent to hinder, delay, or defraud any entity to which the debtor was or became, on or after the date that such transfer was made or such obligation was incurred, indebted; or
JayNote
Section 548(a)(1)(A) corresponds to the Intent Test found at UVTA § 4(a)(1).
(B)
(i) received less than a reasonably equivalent value in exchange for such transfer or obligation; and
(ii)
(I) was insolvent on the date that such transfer was made or such obligation was incurred, or became insolvent as a result of such transfer or obligation;
JayNote
Section 548(a)(1)(B)(ii)(I) corresponds to the Insolvency Test found at UVTA § 5(a).
(II) was engaged in business or a transaction, or was about to engage in business or a transaction, for which any property remaining with the debtor was an unreasonably small capital;
JayNote
Section 548(a)(1)(B)(ii)(II) corresponds to the Overextending Insolvency Test found at UVTA § 4(a)(2)(i).
(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; or
JayNote
Section 548(a)(1)(B)(ii)(III) corresponds to the Sinking Insolvency Test found at UVTA § 4(a)(2)(ii).
(IV) made such transfer to or for the benefit of an insider, or incurred such obligation to or for the benefit of an insider, under an employment contract and not in the ordinary course of business.
JayNote
Section 548(a)(1)(B)(ii)(IV) has no analog in the UVTA but is unique to bankruptcy.
(2) A transfer of a charitable contribution to a qualified religious or charitable entity or organization shall not be considered to be a transfer covered under paragraph (1)(B) in any case in which—
(A) the amount of that contribution does not exceed 15 percent of the gross annual income of the debtor for the year in which the transfer of the contribution is made; or
(B) the contribution made by a debtor exceeded the percentage amount of gross annual income specified in subparagraph (A), if the transfer was consistent with the practices of the debtor in making charitable contributions.
JayNote
Section 548(a)(2) has no analog in the UVTA, although some states (such as Minnesota) have adopted analogous provisions. This subsection is essentially meant to allow a debtor's routine tithing to be protected from avoidance as a fraudulent transfer.

(b) The trustee of a partnership debtor may avoid any transfer of an interest of the debtor in property, or any obligation incurred by the debtor, that was made or incurred on or within 2 years before the date of the filing of the petition, to a general partner in the debtor, if the debtor was insolvent on the date such transfer was made or such obligation was incurred, or became insolvent as a result of such transfer or obligation.

JayNote
Section 548(b) has no analog in the UVTA, and essentially gives the bankruptcy trustee the power to "clawback" distributions and other transfers made to a general partner (but not a limited partner) within two-years of the filing of the bankruptcy petition.

(c) Except to the extent that a transfer or obligation voidable under this section is voidable under section 544, 545, or 547 of this title, a transferee or obligee of such a transfer or obligation that takes for value and in good faith has a lien on or may retain any interest transferred or may enforce any obligation incurred, as the case may be, to the extent that such transferee or obligee gave value to the debtor in exchange for such transfer or obligation.

JayNote
Section 548(c) is generally analogous to the so-called Good Faith For Value Defense of UVTA § 8(a) and (d).

(d)

(1) For the purposes of this section, a transfer is made when such transfer is so perfected that a bona fide purchaser from the debtor against whom applicable law permits such transfer to be perfected cannot acquire an interest in the property transferred that is superior to the interest in such property of the transferee, but if such transfer is not so perfected before the commencement of the case, such transfer is made immediately before the date of the filing of the petition.
JayNote
Section 548(d) is roughly analogous to UVTA § 6.
(2) In this section—
(A) “value” means property, or satisfaction or securing of a present or antecedent debt of the debtor, but does not include an unperformed promise to furnish support to the debtor or to a relative of the debtor;
(B) a commodity broker, forward contract merchant, stockbroker, financial institution, financial participant, or securities clearing agency that receives a margin payment, as defined in section 101, 741, or 761 of this title, or settlement payment, as defined in section 101 or 741 of this title, takes for value to the extent of such payment;
(C) a repo participant or financial participant that receives a margin payment, as defined in section 741 or 761 of this title, or settlement payment, as defined in section 741 of this title, in connection with a repurchase agreement, takes for value to the extent of such payment;
(D) a swap participant or financial participant that receives a transfer in connection with a swap agreement takes for value to the extent of such transfer; and
(E) a master netting agreement participant that receives a transfer in connection with a master netting agreement or any individual contract covered thereby takes for value to the extent of such transfer, except that, with respect to a transfer under any individual contract covered thereby, to the extent that such master netting agreement participant otherwise did not take (or is otherwise not deemed to have taken) such transfer for value.
(3) In this section, the term “charitable contribution” means a charitable contribution, as that term is defined in section 170(c) of the Internal Revenue Code of 1986, if that contribution—
(A) is made by a natural person; and
(B) consists of—
(i) a financial instrument (as that term is defined in section 731(c)(2)(C) of the Internal Revenue Code of 1986); or
(ii) cash.
(4) In this section, the term “qualified religious or charitable entity or organization” means—
(A) an entity described in section 170(c)(1) of the Internal Revenue Code of 1986; or
(B) an entity or organization described in section 170(c)(2) of the Internal Revenue Code of 1986.
JayNote
Except for the definition of "value", § 548(d)(2) has no analog in the UVTA.

(e)

(1) In addition to any transfer that the trustee may otherwise avoid, the trustee may avoid any transfer of an interest of the debtor in property that was made on or within 10 years before the date of the filing of the petition, if—
(A) such transfer was made to a self-settled trust or similar device;
(B) such transfer was by the debtor;
(C) the debtor is a beneficiary of such trust or similar device; and
(D) the debtor made such transfer with actual intent to hinder, delay, or defraud any entity to which the debtor was or became, on or after the date that such transfer was made, indebted.
(2) For the purposes of this subsection, a transfer includes a transfer made in anticipation of any money judgment, settlement, civil penalty, equitable order, or criminal fine incurred by, or which the debtor believed would be incurred by—
(A) any violation of the securities laws (as defined in section 3(a)(47) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(47))), any State securities laws, or any regulation or order issued under Federal securities laws or State securities laws; or
(B) fraud, deceit, or manipulation in a fiduciary capacity or in connection with the purchase or sale of any security registered under section 12 or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78l and 78o(d)) or under section 6 of the Securities Act of 1933 (15 U.S.C. 77f).
JayNote
Section 548(e) has no analog in the UVTA, and the case of a debtor utilizing an irrevocable self-settled trust (a/k/a "asset protection trust") is one of the very few occasions where the federal bankruptcy law of fraudulent transfers is preferable to the state UVTA.

BANKRUPTCY FRAUDULENT TRANSFER OPINIONS

Exempt Property Transfers
In re Vorhes, 2018 WL 1577980 (N.D.Iowa, March 29, 2018).
Self-Settled Trust or Similar Device
In re Cyr (Rodriquez v. Cyr), 2019 WL 1495137 (W.D.Tex., April 1, 2019).
Statute of Limitations
In re Kipnis, 2016 WL 4543772 (Bk.S.D.Fla., 2016).





BANKRUPTCY SECTION 548 TOPICS AND OPINIONS