Bankruptcy ~ Section 550

bk550 Bankruptcy Mainbk550

BANKRUPTCY CODE § 550 (11 U.S. Code § 550)

Liability of transferee of avoided transfer

(a) Except as otherwise provided in this section, to the extent that a transfer is avoided under section 544, 545, 547, 548, 549, 553(b), or 724(a) of this title, the trustee may recover, for the benefit of the estate, the property transferred, or, if the court so orders, the value of such property, from—

(1) the initial transferee of such transfer or the entity for whose benefit such transfer was made; or
(2) any immediate or mediate transferee of such initial transferee.
Section 550(a) is the analog to UVTA § 7(a)(1) generally, and to § 8(b)(1) particularly as to subsequent transferees. Note that § 8(b)(1) is a victim of the chronic mis-organization of the UVTA, and that provision should instead have been found in § 7.

(b) The trustee may not recover under section [1] (a)(2) of this section from—

(1) a transferee that takes for value, including satisfaction or securing of a present or antecedent debt, in good faith, and without knowledge of the voidability of the transfer avoided; or
(2) any immediate or mediate good faith transferee of such transferee.
This section is the analog to UVTA §§ 8(a) generally.

(c) If a transfer made between 90 days and one year before the filing of the petition—

(1) is avoided under section 547(b) of this title; and
(2) was made for the benefit of a creditor that at the time of such transfer was an insider;
the trustee may not recover under subsection (a) from a transferee that is not an insider.
This provision has no direct analog in the UVTA.

(d) The trustee is entitled to only a single satisfaction under subsection (a) of this section.

This provision has no analog in the UVTA, although arguably it would be a good thing if it did.


(1) A good faith transferee from whom the trustee may recover under subsection (a) of this section has a lien on the property recovered to secure the lesser of—
(A) the cost, to such transferee, of any improvement made after the transfer, less the amount of any profit realized by or accruing to such transferee from such property; and
(B) any increase in the value of such property as a result of such improvement, of the property transferred.
(2) In this subsection, “improvement” includes—
(A) physical additions or changes to the property transferred;
(B) repairs to such property;
(C) payment of any tax on such property;
(D) payment of any debt secured by a lien on such property that is superior or equal to the rights of the trustee; and
(E) preservation of such property.
This provision is roughly analogous to UVTA § 8(d).

(f) An action or proceeding under this section may not be commenced after the earlier of—

(1) one year after the avoidance of the transfer on account of which recovery under this section is sought; or
(2) the time the case is closed or dismissed.
The ridiculously short limitations period of § 550(f) which renders it practically useless in the vast majority of cases is why hardly anybody uses it for a fraudulent transfer action and instead applicable state-law voidable transaction or fraudulent transfer law is instead utilized in the vast majority of bankruptcy cases. However, in recent years, the bankruptcy fraudulent transfer provisions have been revived to some degree as a result of the rule of In re Kipnis and similar opinions which hold to the effect that if the debtor has scheduled the United States as a creditor for a tax debt, then the bankruptcy trustee may take advantage of the much-longer 10-year limitations period for the benefit of all creditors in seeking to avoid a transaction under § 548.