August 15, 2016
Authored by: Mark Duedall
In 1571, Parliament enacted a law, sometimes known as the Statute of 13 Elizabeth, creating one of the greatest means of creditor protection – the proscription of fraudulent transfers. As Professors Baird and Jackson stated, the law prevents an “Elizabethan deadbeat [from selling] his sheep to his brother for a pittance.” The law has progressed, covering not just intentional acts to hinder, delay, or defraud creditors, but also “constructively fraudulent transfers” in which a third party who is not in on any con nonetheless gets something from an insolvent debtor for less than reasonably equivalent value.
These are simple, straightforward principles, with which no bankruptcy professional (or really, anyone) could quibble. You got stuff and you didn’t pay for it, so you need to give it back. There are some exceptions. Voiding transfers in the securities industry, for instance, could up-end financial markets. So Congress added Sections 548(d)(2)(B)