December 03, 2014 Articles

Fourth Circuit's Gold Standard and Interpretations of Good Faith

The court adds a little subjectivity to Section 548(c) rulings from other circuits.

By Robert C. Maddox

This article expands on the discussion of the good faith defense under Section 548 (c) of the Bankruptcy Code, which was addressed in a recent case note  summarizing the Fourth Circuit’s decision in Gold v. First Ten. Bank Nat. Assoc. (In re Taneja), 743 F.3d 423 (4th Cir. 2014). In Gold, the Fourth Circuit adopted its standard for determining good faith under Section 548(c) of the Bankruptcy Code.  As discussed in that case note, the Fourth Circuit divided the analysis of good faith into two prongs: subjective and objective.  The subjective prong is the first test and assesses the honesty and state of mind of the transferee. If the transferee satisfies the subjective prong, then the court assesses the objective prong, looking to what the transferee knew or should have known if it followed routine business practices. Id. at 430.

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