June 12, 2014 Articles

Can a Pre-Petition State Tax Lien Foreclosure Be Avoided as a Fraudulent Transfer?

A look at Section 548 of the Bankruptcy Code.

By Lynn J. Hinson

Section 548(a)(1)(B) of the United States Bankruptcy Code provides that a bankruptcy trustee has the power to avoid any pre-petition transfer of an interest of the debtor in property that was made on or within 2 years before the date of the filing of the bankruptcy petition if the debtor was insolvent at the time the transfer was made and voluntarily or involuntarily received less than reasonably equivalent value in exchange for the transfer.  As provided by § 1107(a), a debtor in possession has the same power to avoid a fraudulent transfer. Rule 37(e) of the Federal Rules of Civil Procedure (FRCP) is the applicable federal rule governing the standard by which a party’s failure to preserve ESI is judged and sanctions imposed accordingly. This rule is made applicable to adversary and contested matters in bankruptcy by Rules 7037 and 9014 of the Federal Rules of Bankruptcy Procedure, respectively. Rule 37(e) is now in the process of being revised to clarify the standard for preservation of ESI. 

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