Tag Archives: Assets of the bankruptcy Estate

Aiding and Abetting Fraudulent Transfers

Aiding and Abetting Fraudulent TransfersAiding and abetting fraudulent transfers. Can a Trustee maintain an action against parties who were directly involved in the implementation of a fraudulent transfer, but were not the recipient of any of the fraudulently transferred property? Would it matter if the involved party were an attorney? It depends on where you are.

Two bankruptcy courts have addressed this issue and made contrary holdings, based on differing state law. In the case of In re Parker, 2009 WL205011 (Bkrtcy. E.D. N.Y.), Judge Eisenberg held that applicable New York law “does not recognize a cause of action against parties for aiding and abetting a fraudulent conveyance because …the parties were neither transferees of the assets nor beneficiaries of the conveyance.” Further, the status of one party as an attorney did not change this finding. The Trustee’s only remedy was avoidance of the transfer and recovery of the transferred property for the bankruptcy estate.

In the case of In re Restaurant Development Group, Inc. 397 B.R. 891 (Bkrtcy.N.D. Ill. 2008), Judge Schmitterer noted that Illinois courts recognize claims for conspiracy against attorneys where there is evidence of participation in a plan with their clients to commit fraud. Though acknowledging that other states, under their version of the Uniform Fraudulent Transfers Act, have not found and do not recognize aiding and abetting claims against non-recipients of fraudulent transfers: The Court found such liability under Illinois law. If you have a question about the liability of aiding and abetting fraudulent transfers you should seek the advice of an experience bankruptcy attorney.

For more information about Bankruptcy and aiding and abetting a fraudulent transfers  – contact Cynthia Remboldt, at the Remboldt Law Firm at 404-348-4081. FREE consultations can be scheduled by calling 404-348-4081.  Evening and Weekend hours are available to meet with an attorney.  If bankruptcy turns out to be the best way to move forward considering your alternatives, goals and financial challenges, payment plans are available if you need them.

Good Faith Bankruptcy

Good Faith BankruptcyGood Faith Bankruptcy – What is a good faith bankruptcy and why do we care  so much about it?  Here’s the issue – the bankruptcy code requires that a debtor’s petition is filed in “good faith”.  However, whether a person has filed their petition in good faith is subjective and a test by the Court can not begin to address all of the reason’s a petition is filed in good faith and in bad faith.  But generally, the Court historically looks at the 11 factors there were presented in the case of In Re Kull, 12 B.R. 659 (S.D. Georgia 1981.) Following is a list of the the 11 factors the Court considers when determining a good faith bankruptcy:

  1. the amount of the debtor’s income from all sources (for example was all the income disclosed);
  2. the living expenses of the debtor and his dependents;
  3. the amount of attorney’s fees
  4. the probable or expected duration of the Debtor’s Chapter 13 plan;
  5. the motivations of the debtor and his/her sincerity in seeking relief under the provisions of a Chapter 13 bankruptcy;
  6. the Debtor’s degree of effort (for example, did the debtor complete all the schedules);
  7. the Debtor’s ability to earn and the likelihood of fluctuation in his earnings;
  8. special circumstances such as inordinate medical expense;
  9. the frequency with which the has sought relief under the Bankruptcy Reform Act and its predecessors (has there been multiple filings);
  10. the circumstances under which the Debtor has contracted his debts and his demonstration bona fides, or lace of same, in dealing with his creditors; and
  11. the burden which the plan’s administration would place on the trustee.

Good Faith Bankruptcy – For more information about Bankruptcy Laws, contact the Remboldt Law Firm at 404-348-4081. Free consultations can be scheduled by calling 404-348-4081.  If bankruptcy is a good solution for your financial concerns, payment plan are available if needed and weekend appointments are also available.

Trustee may use IRS Statute of Limitations

Trustee may use IRS Statute of LimitationsA Chapter 7 Trustee may use IRS statute of limitations to avoid a transfer? The Answer is maybe. Here’s an example.

The Chapter 7 Bankruptcy Trustee, using §544(b)(1), filed an action to avoid a fraudulent transfer made by the IRS, the Trustee believed the transfer was fraudulent because it occurred outside the four years permitted under Pennsylvania law.

The IRS who was the defendant in this action filed a motion to dismiss, in the Trustee’s motion, the Trustee asserted that the statute of limitations had run. The Trustee sited another case, In re Emergency Monitoring Technologies, Inc., 347 B.R.17 (Bkrtcy. W.O.Pat 2006). In this case, the IRS was a creditor in existence at the time of the transfer, and the court noted that the IRS would not be bound by the four-year statute, but rather by the 10 year statute contained in the Internal Revenue Code.   Judge McCullough concluded that the Trustee, using his strong-arm powers, could utilize the same 10 year statute of limitations, since the IRS could have pursued the action itself hence, the case was allowed to proceed. Here, the Chapter 7 Trustee may use IRS statute of limitations to avoid a transfer.

If you have questions about the bankruptcy and taxes, the IRS, fraudulent transfers, and a chapter 7 or chapter 13 trustee and what statue of limitations would or may apply to your situation, you should contact a bankruptcy attorney with experience in tax matters related to the chapter 7 and chapter 13 bankruptcy laws.

For more information about Bankruptcy and Taxes  – contact Cynthia Remboldt, at the Remboldt Law Firm at 404-348-4081. FREE consultations can be scheduled by calling 404-348-4081.  Evening and Weekend hours are available to meet with an attorney.  If bankruptcy turns out to be the best way to move forward considering your alternatives, goals and financial challenges, payment plans are available if you need them.

Pre Bankruptcy Petition Check Negotiated Post-Petition

Pre Bankruptcy Petition Check Negotiated Post-PetitionPre Bankruptcy Petition Check Negotiated Post-Petition – What happens when a pre bankruptcy petition check negotiated post-petition? Here’s an example from the bankruptcy court.

Pre Bankruptcy Petition check negotiated post petition.  A Chapter 13 Debtor wrote a pre-petition check that was cashed after the debtor filed bankruptcy.  The Debtor demanded return of the funds from the creditor (the person who had not cashed the check), but the creditor refused. The Debtor then filed a motion to have the creditor held in contempt for violating the stay by refusing to turn over the funds received from the check post petition. The creditor argued that the funds were obtained through presentment of the pre-petition check negotiated post-petition, which was exempt from the bankruptcy automatic stay under s362(b)(11). In re Meadows, 379 B.R. 737 (Bkrtcy. S.D. Ohio 2008).

Judge Humphry agreed that the post-petition presentment of the check (cashing the check) was not a stay violation under s362 (b)(11). However the funds were property of the estate because the check had not been honored when the petition was filed. Barnhill v. Johnson, 503 U.S. 393, 112 S.Ct. 1586 (1992). Thus, even through presentment was excepted from stay violaiton, the crediotr was holding estate property which it refused to turn over upon the Debtor’s deman. The refusal to turn over the funds, did consitutue a stay violation. While obtaining the funds through check presentation was not prohibited, retaining those funds was not allowed. Finally, the Court found tha the creditor’s actions were based on a misunderstanding of s362(b)(11), not an intentional violation of law and did not assess unitive damages.

For more information about Bankruptcy and pre bankruptcy petition check is negotiated post petition  – contact Cynthia Remboldt, at the Remboldt Law Firm at 404-348-4081. FREE consultations can be scheduled by calling 404-348-4081.  Evening and Weekend hours are available to meet with an attorney.  If bankruptcy turns out to be the best way to move forward considering your alternatives, goals and financial challenges, payment plans are available if you need them.