Document Type

Research Memorandum

Publication Date




Determining whether a debtor receives value for a constructively fraudulent prepetition transfer under section 548 of the Bankruptcy Code can prove troublesome when a debtor receives only an indirect, intangible benefit. Section 548 allows a bankruptcy trustee to avoid and recover a debtor’s prepetition transfers for which the debtor did not receive “reasonably equivalent value.” However, judicial interpretation of the term “value” has greatly limited the kinds of benefits to the debtor that might qualify.

Gold v. Marquette (In re Leonard) both illustrates the limitations that courts have placed on the term “value” for purposes of section 548 and provides insight into the direction in which the law may be moving in this area. In this decision, the United States Bankruptcy Court for the Eastern District of Michigan held that intangible benefits received through a third person can constitute “value” only if they are sufficiently concrete and quantifiable. In so doing, the court framed the determination of “value” as an economic inquiry. While courts before this decision had previously determined that indirect, intangible benefits received by debtors needed to be economic in nature in order to constitute value, such courts had not rejected the proposition that certain intangible benefits (such as “peace of mind,” for example) might be quantified in terms of economic value. However, the court’s decision in In re Leonard has exactly this effect. Because certain intangible benefits inherently cannot be economically quantified, this decision effectively prevents such benefits from constituting value.

Part I of this memorandum discusses section 548 of the Bankruptcy Code’s treatment of constructively fraudulent transfers. Particularly, this section discusses how courts apply section 548 where a debtor receives an indirect, intangible benefit for its prepetition transfer. Parts II and III then discuss how courts determine the value of such indirect, intangible benefits. Specifically, Part II describes when indirect, intangible benefits can constitute value, and Part III describes when they cannot. Finally, Part IV then details the potential impact of In re Leonard on courts’ efforts to value indirect, intangible benefits.


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