Johnny B of Brandon, Florida Asks, What is A Fraudulent Transfer in Bankruptcy?

JOHNNY B OF BRANDON, FLORIDA ASKS, WHAT IS A FRAUDULENT TRANSFER IN BANKRUPTCY?Thank you, John B of Brandon.  Here is a Video we made on Fraudulent Transfers in Bankruptcy.

Section 548 of the Bankruptcy Code addresses Fraudulent Transfers in Bankruptcy.  Section 548(a)(1) states, for example, that the Bankruptcy Trustee may Avoid any Transfer of Property or other Interest by the Debtor, provided the Transfer was (1) within two years of the Debtor filing Bankruptcy, (2) was to an Insider, and (3) the Debtor received less than Fair Market Value from the Transferee, in exchange for the Property or Interest.

An Insider is generally defined as either the Spouse or an immediate Family Member of the Debtor.

Many persons, including many Bankruptcy Attorneys, think that any Transfer to an Insider within two years of the Debtor filing Bankruptcy, is a Fraudulent Transfer in Bankruptcy, and may be subject to Avoidance by the Bankruptcy Trustee.  This is not legally true because the third requirement for a Fraudulent Transfer is that the Transferor or Debtor must receive less than Fair Market Value in exchange for the Property or Interest.

However, be careful.  Bankruptcy Courts and Bankruptcy Judges are increasingly either ignorant of the Bankruptcy Laws, or are willfully deciding not to follow them.  You should consult an experienced Bankruptcy Attorney in order to know how Fraudulent Transfers are treated in whatever Jurisdiction would prevail over your Bankruptcy.

Thank you, John B of Brandon, Florida, for your question.   More Questions and Answers on Bankruptcy Matters to come.