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Fraudulent Transfer

If you are planning to file for bankruptcy, in New York, in the near future,

it is important to consider what you have given to family members in the

past. Giving large gifts or transfers that are under fair market value to

an “insider” within six years of filing for bankruptcy can trigger the

finding of a fraudulent transfer under New York rules.


An insider is someone who is related to or close to the individual

or business, like a family member, another member of the business

entity or other affiliate of the individual or business.

In New York, a Chapter 7 Trustee has a “look back” period of six years

prior to the bankruptcy filing to set aside fraudulent transfers.

This time frame runs consecutively with the two-year period

provided by federal bankruptcy law. The substantive law in New York

is generally broader than the Bankruptcy Code in this area.


The Bankruptcy Code allows a Trustee to avoid and set aside a

transfer made within two years of the filing if:


The transfer was made with actual intent to hinder, delay or defraud

a creditor; OR

The debtor received less than reasonably equivalent value for the

transfer, and the debtor either:

Was insolvent on the date of the transfer, or became insolvent as a

result of the transfer; OR

Was engaged in a business, and the debtor’s remaining capital assets

were unreasonably small; OR

Intended to incur debts beyond his ability to repay; OR

The payment was made to an insider pursuant to an employment

contract and not in the ordinary course of business.


Any analysis concerning the propriety of past transfers is very

fact specific, and a debtor must be certain to disclose ALL

such transfers to their attorney.

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