Document Type

Research Memorandum

Publication Date




Transfers of a debtor's interest or obligation in property to a third party, made to prevent creditors from reaching assets in a bankruptcy case, are known as fraudulent transfers. Under current law, there are two types of fraudulent transfers: actual fraud and constructive fraud. Actual fraud requires findings of a debtor's "intent to hinder, delay, or defraud any entity to which the debtor was or became, on or after the date that such transfer was made or such obligation was incurred, indebted." Constructive fraud does not require a finding of intent and occurs when a debtor receives "less than a reasonably equivalent value in exchange for such transfer or obligation and if the debtor was insolvent on the date that such transfer was made or such obligation was incurred, or became insolvent as a result of such transfer or obligation." Under Section 548 of Title 11 of the United States Code (the "Bankruptcy Code"), trustees have the power to avoid fraudulent transfers made within two years of a bankruptcy proceeding.



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