Question 1

What is Section 548 of the Bankruptcy Code?

Accepted Answer

Section 548 (11 U.S.C. 548) allows the trustee to avoid fraudulent transfers made within 2 years before the bankruptcy filing. Two types: actual fraud (Section 548(a)(1)(A): the debtor made the transfer with actual intent to hinder, delay, or defraud creditors), and constructive fraud (Section 548(a)(1)(B): the debtor received less than reasonably equivalent value AND was insolvent at the time of the transfer, was left with unreasonably small capital, or intended to incur debts beyond the ability to pay). The trustee can recover the transferred property or its value.

Question 2

How does Section 548 apply in Florida?

Accepted Answer

FL application: real estate transfers (selling property to a family member for below market value before filing bankruptcy), asset concealment (transferring bank accounts, vehicles, or other assets to friends or family), business transactions (selling business assets at a steep discount before filing), and gifts (making large gifts within 2 years of filing). Florida also has: the Uniform Fraudulent Transfer Act (UFTA, Chapter 726) with a 4-year look-back period. The trustee can use: Section 548 (2-year look-back in bankruptcy) or Section 544(b) + UFTA (4-year look-back under state law, whichever is more advantageous).

Question 3

What are the "badges of fraud" for fraudulent transfers?

Accepted Answer

Badges of fraud: transfer to an insider (family member, business partner), debtor retained possession after the transfer, transfer occurred after a lawsuit was filed or debt was incurred, transfer was of substantially all assets, the debtor was insolvent or became insolvent after the transfer, the consideration received was inadequate, and the transfer was concealed. Courts use these factors to determine: whether the debtor had actual intent to defraud. The more badges present: the stronger the inference of fraud.

Section 548

Section 548 (Fraudulent Transfers)

Two Types

FL Application

Badges of Fraud

Related Terms

Barnes Walker Bankruptcy

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