Fraudulent transfers: intent and value are different routes of inquiry

Read which theory is actually alleged

Section 548 addresses certain transfers of a debtor's property interests and obligations incurred before bankruptcy. One route concerns actual intent to hinder, delay, or defraud. Another involves less than reasonably equivalent value combined with specified financial circumstances. The term fraudulent transfer can therefore describe a claim that does not depend on proving deliberate dishonesty by every participant.

The federal provision includes a two-year period for the principal avoidance rules discussed here. Other statutory powers and applicable state law can involve different periods or requirements. The two-year reference should not be used as a universal limit on all transfer challenges.

Build the transaction file

Record what moved, who received it, what the debtor received in exchange, and when each step occurred. Include agreements, valuations, bank records, board materials, and evidence of the debtor's financial condition at the relevant time. A later business failure does not by itself establish the earlier financial facts.

For an illustrative asset sale, an agreed price is evidence of the transaction but does not end the reasonably-equivalent-value inquiry. The file should explain the asset's condition, marketing efforts, competing offers, related obligations, and any economic benefits asserted to have reached the debtor.

Consider the recipient’s position separately

Section 548(c) provides protection, on its terms, for a transferee or obligee that takes for value and in good faith, to the extent of value given. The applicable avoidance theory and other Code provisions can affect the analysis. A recipient should preserve evidence of both the exchange and the information available when the transaction occurred.

Avoid reconstructing contemporaneous decisions from memory alone. An organized factual account helps counsel distinguish intent allegations, valuation disagreements, solvency evidence, and recipient defenses. These are connected issues, but they require different proof.

Questions for the initial review

• Which transfer or obligation is challenged?
• What value allegedly reached the debtor?
• Which financial condition and time period does the claim rely on?
• What supports the recipient’s good faith and value defense?