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BANKRUPTCY LITIGATION
The attorneys at Kasen & Kasen, P.C. have experience successfully defending against preference and fraudulent transfer lawsuits, confirmation contests and non-dischargeability actions.
Norms for succeeding in preference claims
Preference Lawsuits
To succeed on a preference claim, the plaintiff must prove that the transfers at issue were made: (1) to or for the benefit of a creditor, (2) for or on account of an antecedent debt, (3) while the debtor is insolvent, (4) within 90 days of filing the bankruptcy petition, and (5) in such a way that it enabled the defendant to receive more than if the transfer had not been made. 11 U.S.C. §§ 547(b)(1)-(5).
And, importantly, the debtor is presumed to have been insolvent on and during the 90 days immediately preceding the date of the filing of the petition.
There are seven (7) different affirmative defenses available to preference defendants, three (3) of which are often times successfully utilized to reduce and/or completely eliminate preference exposure. Those three (3) most commonly used affirmative defenses are the “contemporaneous exchange defense,” the “ordinary course of business defense” and the “new value defense.”
The “contemporaneous exchange defense” says that a transfer may not be avoided to the extent the transfer was–
(A) intended by the debtor and the creditor to or for whose benefit such transfer was made to be a contemporaneous exchange for new value given to the debtor; and
(B) in fact a substantially contemporaneous exchange.
The “ordinary course of business defense” says that a transfer may not be avoided to the extent that such transfer was in payment of a debt incurred by the debtor in the ordinary course of business or financial affairs of the debtor and the transferee, and such transfer was –
(A) made in the ordinary course of business or financial affairs of the debtor and the transferee; or
(B) made according to ordinary business terms;
And, the “new value defense” says that a transfer may not be avoided to the extent that, after such transfer, such creditor gave new value to or for the benefit of the debtor—
(A) not secured by an otherwise unavoidable security interest; and
(B) on account of which new value the debtor did not make an otherwise unavoidable transfer to or for the benefit of such creditor
The statute of limitations to bring a fraudulent transfer claim under the bankruptcy law is the later of 2 years after the date of the order for relief, or one year after a trustee is appointed, if the appointment occurs before the expiration for the original 2 year period.
Fraudulent Transfer Lawsuits
Every state in the in the United States has its own fraudulent conveyance law. Additionally, the Bankruptcy Code has its own fraudulent conveyance law.
There are two types of fraudulent transfer claims under the bankruptcy law – actual fraud and constructive fraud. To succeed on a claim of actual fraud, the plaintiff must prove that the transfers at issue were made: (1) within a year of filing the bankruptcy petition; and (2) made or incurred with actual intent to hinder, delay or defraud a creditor of the debtor.
To succeed on a claim of constructive fraud, the plaintiff must prove that the transfers at issue were made: (1) within a year of filing the bankruptcy petition; (2) the debtor received less than reasonably equivalent value ; and (3) the debtor was either insolvent at the time of the transfer or was made insolvent as a result of the transfer.
Insolvency is not presumed in a fraudulent transfer action under the bankruptcy law.
There is a “good faith transferee” affirmative defense available to fraudulent transfer defendants. It says that a transfer may not be avoided to the extent of the value given, so long as the defendant received the transfer in good faith and for value. Good faith requires: (1) an arm’s length transaction; (2) belief that the transfer in question was proper; (3) no intent to disadvantage others; and (4) no intent or awareness that the transfer would hinder, delay or defraud others.
Under state law, the fraudulent transfer look back period is often longer than the 1 year provided for under the bankruptcy law.
The statute of limitations to bring a fraudulent transfer claim under the bankruptcy law is the later of 2 years after the date of the order for relief, or one year after a trustee is appointed, if the appointment occurs before the expiration for the original 2 year period.
Confirmation Contests
The attorneys at Kasen & Kasen, P.C. have experience successfully defending confirmation contests.
Non-Dischargeability Actions
The attorneys at Kasen & Kasen, P.C. have experience successfully defending non-dischargeability actions.