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Bankruptcy Recovery Attorney

Avoidance & Recovery Actions

Trustees administering bankruptcy estates have what are known as “avoidance powers” that allow them to nullify certain transactions engaged in by the debtor before filing for bankruptcy. These powers are most often exercised to the benefit of the Estate and thus its creditors.

The following are a few examples of transactions that a trustee may avoid during bankruptcy:

  • Fraudulent Transfers. When a debtor has transferred property to conceal assets or defraud creditors, the trustee may avoid the transfer if it happened within certain time limitations set by Federal and State Law.
  • Preferential Transfers. In some circumstances, a trustee can avoid the debtor’s transfer of property when it occurred within 90 days of the bankruptcy filing. The time period is extended to one year if the transfer is to a family member, friend, business partner, or other “insider.”.
  • Unperfected Liens. When a lien that was asserted against the debtor’s property has not been perfected properly by the time of the bankruptcy filing it may be avoided. Likewise, liens that went into effect upon the bankruptcy filing or when the debtor’s financial condition deteriorated beyond a certain point may be avoided.

Bankruptcy law sets forth minimum amounts for voidable preferential transfers. Trustees are unlikely to pursue transfers that are $600 or less in aggregate when the debt is primarily consumer in nature and the case does not involve a transfer to an insider. For cases where the debt is not primarily consumer in nature, that amount rises to $6,825.

If a bankruptcy trustee seeks to avoid a transaction and recover the transferred property, he or she must commence recovery actions in the form of an adversary proceeding–the Bankruptcy Court’s version of a civil complaint. The judge will then determine whether the transfer warrants avoidance and if the property or money can be recovered from the party that received the transfer. Additionally, trustees may file recovery actions under state fraudulent transfer or similar laws where the lookback period is sometimes longer than that allowed under the United States Bankruptcy Code.

Bankruptcy trustees also have avoidance powers when a debtor tries to pay certain creditors ahead of others during the time period leading up to the bankruptcy filing. Giving preference to these creditors is contrary to the policy of equal treatment of creditors and the trustee has the power to avoid them by requiring the preferred creditors to repay the preference to the bankruptcy estate.

At Thomas H. Curran Associates our attorneys have vast experience and the practical know-how to effectively represent trustees and creditors seeking the return of assets to the bankruptcy estate through a recovery action or defending a creditor against such actions. Our attorneys will help to formulate effective and winning strategies for resolving preference and other avoidance cases in a manner that is most favorable to our clients.

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