Get to know us. Our unbiased credit research and global market insights help the world’s financial decision makers to better manage risk.
Fraudulent Transfers: A General Primer
Mark Lightner, Esq. – Head of Special Situations Legal Research
EXECUTIVE SUMMARY
- Fraudulent transfer claims are one of the most common types of litigation claims in bankruptcy cases, but they are often misunderstood by finance professionals. These claims appear to be simple on the surface, but they can be very complex, particularly in large chapter 11 bankruptcy cases.
- This primer, which is designed primarily for finance professionals, begins with a discussion of what these claims are, why they exist, and who can assert them. It then discusses the elements of fraudulent transfer claims, some of the most common defenses, and a few general thoughts on the likelihood of winning a fraudulent transfer claim in litigation.
- This primer does not discuss any specific fraudulent transfer litigation. Rather, it is designed to be a resource and a document that can be referenced in the future when we discuss fraudulent transfers with respect to specific credits.
- Finally, we have prepared two printable / downloadable PDF documents (linked below) that are intended to act as reference guides for our readers. The first document outlines the elements of fraudulent transfers without all the legalese, and the second document, which we call a “Scorecard,” is a document that can be used to evaluate the strength of any fraudulent transfer claim.
WHAT ARE FRAUDULENT TRANSFER CLAIMS, AND WHO CAN ASSERT THEM?
The origin of fraudulent transfers goes back over 450 years to the Elizabethan era and the Fraudulent Conveyance Act of 1571. That statute is sometimes referred to as the “Statute of Elizabeth” and it allowed for the unwinding of fraudulent transactions made by an “insolvent” or “bankrupt” person.
In modern times, however, fraudulent transfer claims in the United States primarily find their roots in two sources of American law. The first source is the U.S. Bankruptcy Code (the “Bankruptcy Code”), which is a federal law that was passed by Congress in 1978. See 11 U.S.C. § 101 et seq. The Bankruptcy Code applies to any person (whether an individual or a legal entity) that files a petition for relief under one of the chapters of the Bankruptcy Code (like chapter 7 or 11). The second source of law is state law. Most states have adopted either the Uniform Voidable Transaction Act, the Uniform Fraudulent Transfer Act, or the Uniform Fraudulent Conveyances Act.
To download the full article, fill out the form opposite and we’ll email you a PDF copy of the report.
Would you like access to the report?
Submit your contact details to request the full report.
Request a Trial
Receive 1-month complimentary access to our research platform, where you can browse our library of expert-produced insights and reporting. Qualifying institutions can gain access to our platform.
REQUEST A TRIAL
Sign up to our Newsletter
It is our mission to enable fixed income professionals to know more, risk better, and ultimately create value. Sign up to receive our monthly newsletters to get the latest credit insights direct to your inbox.
SUBSCRIBE NOW
Our Products
We’re proud to be the trusted resource for these credit research consumers:
Research
The independent research and actionable ideas you need to help guide investment and risk management decisions.
Risk Products
From BondScore to Credit Quality Score and Fallen Angel Score, these products give you an analytial edge.
Covenant Review
Brokers, financial advisors and private wealth managers entrusted with their clients’ assets leverage our intellectual capital when it comes to the credit markets.
LevFin Insights
News and analysis covering the debt capital markets including leveraged loans, high yield, secondary trading, CLOs, middle market and BDCs.
Markets Served
We’re proud to be the trusted resource for these credit research consumers: