II. Fraudulent Transfers Actions and Its Defenses

While this list is quite expansive, there are some splits in the authority dealing with whether a transfer occurs in situations that one would ordinarily think a transfer did take place.

For example, the Fifth Circuit and the Seventh Circuit have both addressed the issue of whether a down payment on real property constituted a transfer for fraudulent conveyance purposes. The Fifth Circuit holds it did. See In re McConnell, 934 F.2d 662, 664 (5th Cir. 1991). The Seventh Circuit holds that it does not. See In re Wey, 854 F.2d 196, 199 (7th Cir. 1988).

Similarly, several courts have looked at whether the transfer of property from non-exempt property to exempt property constitutes a transfer that can be challenged as a fraudulent transfer. Some have held that it is not a transfer. See Weissing v. Levine (In re Levine), 139 B.R. 551, 554 (Bankr. M.D. Fla. 1992). Others have held that it is a transfer. See In re Beckman, 104 B.R. 866 (Bankr. S.D. Ohio 1989); In re Breuer, 68 B.R. 48 (Bankr. N.D. Iowa 1985).

Lastly, even though several courts have held the termination of a lease could be a transfer, at least one court has held that the termination of a franchise-dealership agreement was not a transfer subject to being set aside as a fraudulent conveyance. See Matter of Jermoo's Inc., 38 B.R. 197, 206 (Bankr. W.D. Wis. 1984).

Thus, while the issue of whether a transfer took place is normally not an issue, when the transaction being challenged is complex, this element could provide a defense to the action.

In addition, the BAPCPA has weighed in as it relates to one area of Section 548 by specifically making transfers to insiders under employment contracts, not in the ordinary course of business, subject to the constructive fraud provisions of § 548(a)(1)(B). See BAPCPA §1402. Because of its inclusion in the constructive fraud provision, the defendant can defend on the basis of a reasonably equivalent value being given for the transfer. Further, the application of § 548 to employment contracts is not delayed. Instead, this section is effective on the date of the enactment for cases filed on or after the date of the enactment. So, if a case was filed after the enactment of the BAPCPA, a plaintiff could challenge a transfer under an employment contract that occurred within two (2) years of the filing of the bankruptcy.

1.2. Interest of the debtor in property, or any obligation incurred by the debtor

An essential element of an action under this section is that the debtor must have had an interest in the property transferred. Noland v. FRE, Inc. (In re Jackson), 105 B.R. 15, 16 (Bankr. S.D. Ohio 1989). Because the interest of the debtor in the property is an undefined term in the bankruptcy code, the court will generally look to state law to help define its parameters. In re Hulm, 738 F.2d 323, 326 (8th Cir. 1984), cert. denied 469 U.S. 990, 83 L. Ed. 2d 331, 105 S. Ct. 398 (1984); Simpson v. Penner (In re Simpson), 36 F.3d 450 (5th Cir. 1994); In re Dews, 152 B.R. 982 (D. Colo. 1993); Furr v. Reynolds (In re Reynolds), 151 B.R. 974 (Bankr. S.D. Fla. 1993); Lowe v. Brajkovic (In re Brajkovic), 151 B.R. 402 (Bankr. W.D. Tex. 1993).

The battles are fought in two areas: (1) where the debtor owns legal title to a piece of property, and (2) where the debtor does not possess legal title but some equitable interest. When the former is the case, it is often the debtor who must sustain the burden of proof that while legal title may be vested in his or her name, de facto or equitable title belongs to the alleged transferee. For example, in the case of In re Reynolds, 151 B.R. 974 (Bankr. S.D. Fla. 1993), the debtor was the legal title holder to real estate. The court found however, that no fraudulent conveyance had taken place because the debtor did not have an interest in the property beyond the face of the document. The debtor successfully proved that he was the legal title holder of the property for the benefit of his son to allow him to obtain financing for the property, and that neither the debtor, nor the son, had ever considered the debtor to be the legal title holder.

Here, the idea would be to use either a resulting trust or a constructive trust as an effective defense to a fraudulent transfer. Constructive trusts result from fraud, bad faith, abuse of confidence or violation of fiduciary duty. See Lollis v. Lollis, 291 S.C. 525, 354 S.E.2d 559, 561 (1987); Doe v. Roe, 323 S.C. 445, 475 S.E.2d 783, 786 (Ct. App. 1996). Fraud is an essential element of constructive trust, although it need not be actual fraud. See Whitmire v. Adams, 273 S.C. 453, 257 S.E.2d 160, 163 (1979); Doe v. Roe, 323 S.C. 445, 475 S.E.2d 783, 786 (Ct. App. 1996). The term fraud in these cases means some “reprehensible conduct.” See Chapman v. Citizens and Southern National Bank of South Carolina, 302 S.C. 469, 395 S.E.2d 446, 452 (Ct. App. 1990). Further, the Trust is against the person or entity that engaged in the “reprehensible conduct.” As stated in Halbersberg v. Berry,

[a] constructive trust arises against one who by fraud, actual or constructive, by duress or abuse of confidence, by commission of a wrong or by any form of unconscionable conduct, artifice, concealment, or questionable means and against good conscience, either has obtained or holds the right to property which he ought not in equity and good conscience hold and enjoy.

Halsbersberg v. Berry, 302 S.C. 97, 394 S.E.2d 7, 13 (Ct. App. 1990). The idea would be for the transferree to show that title was only placed into the transferror’s name because of some “reprehensible conduct” and the transfer of the property to the transferree was merely the transferor returning the property to the one against whom he had engaged in this fraud or otherwise unconscionable conduct.

A resulting trust is very different. To create a resulting trust, the transferee need only show that the money used to originally purchase the property was from him and not from the transferror. However, it must be shown that the money used for the purchase was not a loan. Reed v. Reed, 217 Ga 303, 122 S.E.2d 253, 259 (1961) (resulting trusts do not result when money used in purchase was a loan); Tiller v. Owen, 243 Va 176, 413 S.E.2d 51, 53 (1992) (funds used for purchase cannot be a loan to titled owner in order to create a resulting trust); Pierce v. Harrison, 199 Ga. 197, 33 S.E.2d 680, 684 (1945) (a person in whose favor a trust is claimed to result from the payment of purchase money must pay the purchase money as his own, and if he merely advances it as a loan, no trust will result). [1]

Further, the resulting trust is created, if at all, at the time the purchase is made. See Hodges v. Hodges, 243 S.C. 299, 133 S.E.2d 816, 819 (1963). Someone, at the time of the purchase of property, that loans money for the purchase of the property, but does not sign the contract of sale, does not obligate himself to make payments in the future and signs no other documents binding him, does not have a resulting trust. See Tiller v. Owens, 243 Va. 176, 413 S.E.2d 51, 53 (1992).

While constructive trusts and resulting trusts could be defenses to fraudulent conveyance actions, they could also be used by the plaintiff in furtherance of setting aside the transfer. For example, if the debtor supplied the down payment for property but title was placed in the name of another, the plaintiff may allege that the debtor should be declared the true owner of the property under a resulting trust theory.

1.3. incurred within one year before the date of the filing .

Section 548 of the Bankruptcy Code provides the limitations period available to trustees and debtors-in-possession. The section provides that a trustee may avoid any transfer of an interest of the debtor that was made or incurred on or within one year before the date of the filing of the petition, if procured through fraudulent means of the debtor. 11 U.S.C. § 548(a)(1)(A).

The timing of the transfer, therefore, becomes exceedingly important. Obviously, from the language found in the statute, the object of Section 548 was to prevent prepetition transfers, not postpetition transfers. See Consolidated Partners Inv. Co. v. Lake, 152 B.R. 485, 490 (Bankr. N.D. Ohio 1993). Therefore, a transfer that occurs after the bankruptcy petition is filed is not covered under this statute. Consolidated Partners Inc. Co. v. Lake, 152 B.R. 485, 490 (Bankr. N.D. Ohio 1993); Fisher v. First Union Mortgage Corp. (In re Fisher), 80 B.R. 58, 60 (Bankr. M.D.N.C. 1987); Eisenberg v. Bank of New York (In re Sattler's Inc.), 73 B.R. 780, 790 (Bankr. S.D.N.Y. 1987).

In complex transactions, the specific date of the transfer could prove to be important. Generally, where a lien of some sort is granted as part of the transaction, the transfer is deemed to take place on the date the lien is perfected, provided it is done prior to the bankruptcy filing. Tucker Oil Co., Inc. v. First State Bank of Crossett (In re Tucker Oil Co., Inc.), 55 B.R. 78, 81 (Bankr. D. Ark, 1985) appeal decided 64 B.R. 183 (Bankr. W.D. Ark. 1985). At the same time, a granting of a security interest to a preexisting creditor during the one year period, without receiving new consideration, will alter the entire transfer or debt to the latest transaction date. Kelley v. Horner (In re Kelley), 7 B.R. 384, 388-89 (Bankr. D.S.D. 1980). In deed questions, the operative date is when the deed is recorded. Gennet v. Docktor (In re Levy), 185 B.R. 378, 382 (Bankr. S.D. Fla. 1995). The obvious pattern is that the court will usually look to the date that actual title vests or the date on which the last significant part of the transfer took place. In other words, the transfer date is liberally construed to find coverage under the statute.

The BAPCPA amends this section of 548. Specifically, instead of a 1 year reach back period, the BAPCPA provides for a two year reach back period. See BAPCPA §1402. However, Section 1406 of the BAPCPA provides that this amendment to 548 from 1 year to 2 years, applies only to cases commenced under title 11 more than one year after the date of the enactment. So, Congress decided to delay this amendment an additional six months from when other parts of the BAPCPA will become effective.

1.4. voluntarily or involuntarily

By including these words in the main portion of 548, Congress established an interesting classification scheme. Please recall that Section 548 is split into two sections 548(a)(1)(A) actual intent to hinder delay or defraud and 548(a)(1)(B) received less than reasonably equivalent value in exchange. Transfers to be set aside can thus be classified as (a) voluntary with fraudulent intent, (b) voluntary without reasonably equivalent value, (c) involuntary with fraudulent intent and (d) involuntary without reasonably equivalent value.

Actual intent does not need to be proven by direct evidence or by an admission. Nakagawa v. Sergio, Inc. (In re Sergio, Inc.), 16 B.R. 898, 908 (Bankr. D. Hawaii 1981). There exists common circumstantial indicia of a fraudulent intent that can be used to prove actual intent. Such indicia are usually referred to as “badges of fraud” and include, but are not limited to: (1) actual or threatened litigation against the debtor; (2) purported transfers of all or substantially all of the debtor's property; (3) insolvency or other unmanageable indebtedness on the part of the debtor; (4) a special relationship between the debtor and the transferee; and (5) retention by the debtor of property involved in putative transfer (i.e., reservation of benefits, control or dominion by the debtor -- In re Warner, 87 B.R. 199, appeal dismissed 94 B.R. 734 (M.D. Fla. 1988)); see also Campbell v. Haddock (In re Haddock), 246 B.R. 810, 813 (stating that courts look at certain indicia to determine if there is an actual intent to defraud creditors: "the insolvency or indebtedness of the transferor, lack of consideration for the conveyance, relationship between the transferor and the transferee, the pendency or threat of litigation, secrecy or concealment, departure from the usual method of business, the transfer of the debtor's entire estate, the reservation of benefit to the transferor, and the retention by the debtor of possession of the property") ; Max Sugarman Funeral Home, Inc. v. A.D.B. Investors, 926 F.2d 1248, 1254 (1st Cir. 1991), on remand 149 B.R. 274. Other badges of fraud that have been noted in categorical form include:(1) absconding with the proceeds of the transfer immediately after their receipt; (2) absence of consideration when the transferor and transferee know that outstanding creditors will not be paid; (3) a huge disparity in value between the property transferred and the consideration received; and (4) the fact that the debtor was the officer, agent, or creditor of the transferor. Carmel v. River Bank Am. (In re FNB Food Services, Inc.), 185 B.R. 265, 275 (N.D. Ill. 1995), affirmed after remanded82 F.3d 1387, rehearing denied. Still other cases have referred to additional badges of fraud: (1) the conveyance is concealed; (2) the transferee takes property in trust for the transferor and transferor remains in possession; and (3) the debtor deals with property as his own. Nakagawa v. Sergio, Inc. (In re Sergio, Inc.), 16 B.R. 898, 908 (Bankr. D. Hawaii 1981).

These badges of fraud and other suspicious behavior must be considered as a whole. A trustee does not have to prove any one of these factors with any degree of certainty. The facts, as taken together, only need to lead to the conclusion that actual fraud existed. Harman v. First Am. Bank of Md. (In re Jeffery Bigelow Design Group, Inc.), 956 F.2d 479, 483-84 (4th Cir. 1992). The test requires a subjective determination of the debtor's motivation. Id. The standard is that fraudulent intent exists where the trustee shows that the transferor acted under circumstances precluding any reasonable conclusion other than that the purpose of the transfer was fraudulent as to his creditors. Lives Science Church of River Park v. Personette (In re Life Science Church of River Park), 34 B.R. 529, 534 (Bankr. N.D. Ind. 1983); see also Hovis v. Powers Construction Co., Inc. (In re Hoffman Assocs., Inc.), C/A No. 90-02419, Adv. Pro. No. 91-8293 (Bankr. D. S.C. 4/25/95) (Judge Waites) (finding that where debtor made payments only to creditors who were insiders or to creditors who had obtained personal guarantees from insiders that the payments were made with the actual intent to defraud the debtor's other creditors).

Which parties must be shown to have intent to defraud is unclear. Certainly, the debtor/transferor must have the requisite intent, but some courts hold that the transferee must have the intent as well. Stratton v. Equitable Bank, 104 B.R. 713, 726 (D. Md. 1989), aff'd 912 F.2d 464 (4th Cir. 1989); William B. Tanner Co v. United States (In re Business Systems, Inc.), 642 F.2d 200, 203 (6th Cir. 1981) (transferee does not have to return payments if transferee entered transaction in good faith without knowledge of intent to defraud creditors); Prisbrey v. Noble, 505 F.2d 170, 176 (10thCir. 1974) (transferee had bonafide purchaser status which trumped rights of trustee). The apparent logic for this rule is simple. If a bona fide purchaser, without knowledge or intent to defraud, takes the property for value, then he or she has paid what he or she believes to be fair consideration for the item, or, at the very least, the debtor has no hope of gaining a return on the transfer after the bankruptcy has passed. In these cases, the transferee must still show that the consideration paid was in an amount that he or she believed to be reasonable. Id. In truth, the rule appears to be that once the badges of fraud have been proven against the debtor, then the transferee is presumed to have a similar intent, and this intent can be overcome by showing that the transferee was a bona fide purchaser for value. If proven, then the transfer cannot be undone.

There is, however, a middle ground between the two rules and this middle ground appears to be codified in Section 548(c). This section and most recent cases hold that a transferee is protected from the fraudulent conveyance statute to the extent of the consideration given. See Jimmy Swaggart Ministries v. Hays (In re Hannover Corp.), 310 F.3d 796 (5th Cir. 2002) (transferee protected to the extent of good faith value provided); Orlick v. Kozyak (in re Financial Federated Title & Trust, Inc.), 309 F.3d 1325 (11th Cir. 2002) (commissions earned without knowledge of Ponzi scheme could be considered as received in good faith to the extent of value being given); but see Meeks v. Red River Entertainment (In re Armstrong), 285 F3d 1092 (8th Cir. 2002) (gambling casino did not act in good faith). Of course, which of the three positions taken will depend upon the party asserting the argument. Struve v. Khan (In re Mesa), 48 B.R. 208, 210 (Bankr. S.D. Fla. 1985). Under the presumption that the transferred item is always more valuable than the consideration paid, trustees will inevitably always argue that only the debtor's intent needs to be proven, as this test will grant the trustee the return of the entire item with no refund to the transferee; the transferee will always argue that both party's intent needs to be proven, because by keeping the property, the transferee retains his benefit of the bargain; and finally, the most logical remedy, the one in the middle, will go unargued, but will be the source of many judicial opinions, and has been termed the good faith rule. See Gill v. Maddalena (In re Maddalena), 176 B.R. 551, 555 (Bankr. C.D. Cal. 1995) (if transferee neither knew nor should have known of the fraudulent nature of the transfer, then transferee is entitled to retain the fraudulent transfer to the extent of the value given in the exchange; if transferee knowingly or recklessly participates in the fraudulent scheme, then he or she is not protected); Burtrum v. Laughlin (In re Laughlin), 18 B.R. 778 (Bankr. W.D. Mo. 1982). In cases where the transferee’s “good faith” is an issue or the subject of discussion, courts generally look for indicia of an arms-length transaction, or whether there are gross departures, to determine whether the transferee is entitled to any special treatment. Bullard v. Aluminum Co. of America, 468 F.2d 11, 13 (7th Cir. 1972); First Nat. Bank of Dalton v. Browning Fufters, Inc. (In re Browning Tufters, Inc.), 3 B.R. 487, 490 (Bankr. N.D. Ga. 1980).

This added twist on the law makes the adequacy of consideration all that much more important, and in some cases, a necessary factor in proving a fraudulent conveyance case. See Schaps v. Just Enough Corp. (In re Pinto Trucking Service, Inc.), 93 B.R. 379, 385 (Bankr. E.D. Pa. 1988) (even where debtor did become insolvent as a result of transfer, court would not conclude fraudulent conveyance where debtor received adequate and fair compensation for sale); Seidle v. Van de Grift (In re 18th Ave. Development Corp.), 18 B.R. 904, 905 (Bankr. S.D. Fla. 1982) (evidence that transferor received a fair value was sufficient to show not a fraudulent conveyance). However, in most cases, unequal consideration will not in itself prove a fraudulent conveyance case. See e.g., Guitierrez v. Lomas Mortgage (In re Gutierrez), 160 B.R. 788, 791 (Bankr. W.D. Tex. 1993) (purchase at 70% of value is insufficient, without other badges of fraud, to prove fraudulent conveyance). And there are cases that hold that valuable consideration is not an affirmative defense to a fraudulent conveyance. Steimetz v. Sorokin (In re Beechwood Medicenter of Flint), 23 B.R. 939, 942 (Bankr. E.D. Mich. 1982); Loftis v. Minar (In re Montanino), 15 B.R. 307, 312 (Bankr. D.N.J. 1981) (sale to parents living in same home was perceived to be effort to defraud creditors, and therefore, revocable, regardless of adequacy of consideration). Upon review of the Beechwood case, the court had the facts of a preference case, and because of time limitations, it was trying to fit it into the fraudulent conveyance statute. The case does however stand for the proposition that, even if fair consideration is received, the transaction will be unwound where it is determined that the debtor was attempting to either prevent certain creditors from receiving what they would receive without the transfer, or the debtor was attempting to make the eventual receipt of those payments or property more difficult for one or more creditors. Id. at 311.

One of the hotly litigated issues and one of the acts that angers trustees and creditors alike is where a debtor transfers non-exempt assets into exempt assets. While some courts hold that these internal transfers are not transfers at all, the majority of the courts do. Those courts that get past the initial question are inevitably faced with the question of whether the transfer to exempt property is a badge of fraud in and of itself. Creditors and trustees are often disappointed to find that the answer is no. An overwhelming number of cases state that the trustee must go one step further and prove that the transfer was made to prevent, hinder or delay creditors from reaching the assets. Fed. Savings & Loan Ins. Corp v. Holt (In re Holt), 894 F.2d 1005 (8th Cir. 1990); Samore v. Breuer (In re Breuer), 68 B.R. 48 (Bankr. N.D. Iowa 1985); Ernst v. O’Brien (In re O’Brien), 67 B.R. 317 (N.D. Iowa 1986); Jaudson v. Levine (In re Levine), 40 B.R. 76 (Bankr. S.D. Fla. 1984); Egan v. Oliver (In re Oliver), 38 B.R. 407 (Bankr. D. Mass. 1984). However, the additional proof necessary appears to be minimal. Crews v. First Colony Life Ins. Co. (In re Barker), 168 B.R. 773, 778 (Bankr. M.D. Fla. 1994) (even though placing funds into annuities was sound investment strategy, evidence appeared to show that transfer was made in attempt to hinder creditor’s attempt to obtain the items.).

6. lack of reasonably equivalent value in exchange

The old equitable adage that one must be equitable before one is generous found its home in Section 548(a)(1)(B). Basically one must show that the debtor received less than a reasonably equivalent value in exchange for the transfer and that some creditor was detrimentally effected.

6.1. received less than reasonably equivalent value

Obviously, in this phase of the test, the court is comparing what left the estate to what entered into the estate. Southmark Corp. v. Riddle (In re Southmark Corp.), 138 B.R. 820 (Bankr. N.D. Tex. 1992); see Anderson v. Blair (In re Blair), Case No. 99-08835-W, Adv. Pro. No. 99-80410-W (Bankr. D. S.C. 6/27/00) (finding that reasonably equivalent value was given for the transfer of debtor's one-half interest in house to separated husband because the husband had transferred property to the debtor and assumed liabilities pursuant to a separation agreement which value was nearly identical to the debtor's one-half interest in house). Generally, the litmus test on this issue is -- as long as the unsecured creditors are no worse off because of the transfer, then the debtor received a reasonably equivalent value to that which left the estate because of the transfer. Harman v. First Am. Bank of Md (In re Jeffrey Bigelow Design Group, Inc.), 956 F.2d 479, 484 (4th Cir. 1992). This does not mean that the debtor needs to receive a dollar for dollar exchange in order to have been paid a “reasonably equivalent value.” Butler Aviaion Int’l v. Whyte (In re Fairchild Aircraft Corp.), 6 F.3d 1119, 1125-26 (5th Cir. 1993); Southmark Corp. v. Riddle (In re Southmark Corp.), 138 B.R. 820, 829 (Bankr. N.D. Tex. 1992). There is no magic percentage of fair market value that needs to be achieved in order to constitute reasonably equal consideration. Fargo Biltmore Motor Hotel Corp. v. Metropolitan Fed. Bank (In re Fargo Biltmore Motor Hotel Corp.), 49 B.R. 782, 788 (Bankr. D.N.D. 1985) (flat percentage basis approach is inappropriate, however, a good starting point with which to gauge a transfer’s reasonableness). However, one line of cases holds that anything less than 70% of the value is not reasonably equal. Durrett v. Washington Nat’l Ins. Co., 621 F.2d 201, 203 (5th Cir. 1980); Thrifty Dutchman, Inc. v. Florida Supermarkets, Inc. (In re Thrifty Dutchman, Inc.), 97 B.R. 101, 108 (Bankr. S.D. Fla. 1988). In another case, Misty Management Corp. v. Lockwood, 539 F.2d 1205 (9th Cir. 1976), the court held that a transfer was for less than reasonably equivalent value even though the transfer was for over 70% of the collateral’s value, where the dollar amount of the difference was $276,000. One court has stated that the relative percentage of fair market value [2] is but one factor to be compared along with good faith and the relative difference in amount paid compared to the fair market value. Cooper v. Smith (In re Smith), 24 B.R. 19 (Bankr. W.D.N.C. 1982); disapproved of by Bundles v. Baker (In re Bundles), 856 F.2d 815, 819 (7th Cir. 1988). Other courts follow the 70% rule only in cases of private sales. Madrid v. Lawyers Title Ins. Corp. (In re Madrid), 725 F.2d 1197 (9th Cir. 1984). A final line of cases holds that courts must determine reasonably equivalent value on a case by case basis. First Federal Savings & Loan Assn. of Bismark v. Hulm (In re Hulm), 738 F.2d 323, 327 (8th Cir.), cert denied, 469 U.S. 990 (1984).

While the court generally must look to the surrounding circumstances of the transaction to determine value, Butler Avaiation Int’l v. Whyte (In re Fairchild Aircraft Corp.), 6 F.3d 1119, 1127 (5th Cir. 1993), it is improper for a court to consider sentimental value of the debtor or other similarly subjective criteria. Official Comm. of Creditors v. Shearson Lehman Bros. Holdings (In re First Capital Holdings Corp.), 179 B.R. 902, 907 (Bankr. C.D. Cal. 1995). At the same time, a completely objective, mathematical standard does not apply either. A court should consider things such as whether indicia of an arms length transaction are present and other factors showing the actual fair market value of the property sold. Cooper v. Aschley Comm., Inc. (In re Morris Communications NC, Inc.), 914 F.2d 458, 467 (4th Cir. 1990) (appearing to side with the First Federal v. Hulm, supra, line of cases).

The operative date is the value of property and consideration as of the date of transfer. Robinson v. Taylor (In re Robinson), 80 B.R. 455, 460 (Bankr. D. Ill. 1987).

6.2 insolvent/small capital remaining/ debt incurred beyond ability to pay

Some courts hold that if the party attacking the transfer as being fraudulent meets the burden of proving that the consideration given was inadequate, the burden of the defense of the transferor’s solvency, or the proof that one of the three subsections of § 548(a)(2)(B) exists, passes to the party seeking to uphold the transfer. See e.g., Josual Slocum, Ltd. v. Boyle (In re Joshua Slocum, Ltd., 103 B.R. 610, 620 (Bankr. E.D. Pa. 1989). However, most cases place this burden on the trustee. See e.g., Vadnais Lumber Supply, Inc. v. Byrne (In re Vadnais Lumber Supply, Inc.), 100 B.R. 127, 133 (Bankr. D. Mass. 1989).

6.2.1 Insolvency

Courts look to see whether a debtor is either insolvent at the time of the transfer or rendered insolvent as a result of the transfer, and either one will be sufficient to pass this portion of the analysis. Enwotwen Indus., Inc. v. Brookstone Ltd. Partnership (In re Newtowne, Inc.), 157 B.R. 374, 378 (Bankr. S.D. Ohio 1993); see Anderson v. Simchon (In re Southern Textile Knitters, Inc.), C/A No. 98-07203-W, Adv. Pro. No. 99-80026-W (Bankr. D. S.C. 7/28/00) (finding that Trustee's failure to show that debtor was insolvent following the transfers at issue was fatal to his cause of action under Section 548). To decide whether a debtor is insolvent, courts generally ask -- what would the buyer be willing to pay for the debtor’s entire package of assets and liabilities? If the price is positive, the debtor is solvent; if the price is negative, the debtor is insolvent. Covey v. Commercial National Bank of Peoria, 960 F.2d 657, 660 (7th Cir. 1992). Courts look to the debtors balance sheet. Mellon Bank, N.A. v. Metro. Communications, Inc., 945 F.2d 635 (3d Cir. 1991), cert. denied 112 S. Ct. 1476, 117 L. Ed. 2d 620 (1992). However phrased, this method is a review of the assets and liabilities of the debtor, and a comparison between the two.

When looking at assets, the court must assign to those assets that are readily susceptible to liquidation, Joshua Slocum, Ltd. v. Boyle (In re Joshua Slocum, Ltd.), 103 B.R. 610, 621 (Bankr. E.D. Pa. 1987), their fair market value. Davis v. Suderor (In re Davis), 169 B.R. 285, 299 (E.D.N.Y. 1994); Pioneer Home Builders, Inc. v. Internaional Bank of Commerce (In re Pioneer Home Builders, Inc.), 147 B.R. 889, 892 (Bankr. W.D. Tex. 1992) (fair market value price at time of transfer is most equitable standard). Therefore, assets are best valued by determining what price they would bring on the open market. An open market value has been further defined as that value that a prudent business person could obtain from the sale of an asset when there is a willing buyer and a willing seller. See Pioneer, 147 B.R. at 892. Under this approach it is inappropriate to add costs and expenses associated with the sale of the assets. Id. The method of market price valuation focuses on what a willing buyer would pay, not necessarily what a willing seller would ultimately receive. Id. However, the value can be reduced by factors regarding the difficulty of the sale of the asset, but only if they affect the market price and do not relate to the costs of sale. Id. The value may be further adjusted by the net costs of making the asset marketable. Id. The court cannot take into consideration the debtor’s subjective sentimental value placed upon the item. Id. The court can value doubtful or contingent claims at less than face value. Join-in International Ltd. v. New York Wholesale Dist. Corp. (In re Join-in International (USA) Ltd.), 56 B.R. 555, 560 (Bankr. S.D.N.Y. 1986). If a debtor is a guarantor on a liability, courts will generally multiply the total debt by the percent chance that the guarantee will be exercised to determine the liability to be included in the balance sheet. Covey v. Commercial Nat’l Bank of Peoria, 960 F.2d 657, 660 (7th Cir. 1992) (cited in 26 Collier Bankr. Cas.2d 1046). Goodwill can be considered an asset, and can be determined by average high earnings over a period of years, valuable customer lists, and/or by trade names. Standard Supply Co. v. Cohen (In re Roco Corp.), 701 F.2d 978, 984 (2d Cir. 1983).

The assets are to be reduced by liabilities. Courts can refer to 11 U.S.C. § 101(4) to determine what is a liability. See Joshua Slocum, Ltd. v. Byole (In re: Joshua Slocum, Ltd.), 103 B.R. 610, 622 (Bankr. E.D. Pa. 1989) (finding that shareholders stock redemptions were not liabilities under Bankruptcy Code § 101(4)).

At least one court has allowed the use of the retrojection method to prove insolvency. Kanasky v. Randolph (In re R. Purbeck & Assocs., Ltd.), 27 B.R. 953, 955 (Bankr. D. Conn. 1983) (analyzing insolvency in a preference action). Since insolvency at a given point in time is often difficult to demonstrate by direct proof, courts permit the trustee to show that the debtor was insolvent at one point in time and then prove that the same condition existed at the time of the subject transfer. "This method . . . applies equally to situations in which the trustee starts at a point in time prior to the transfer. . . .[to use this method, the trustee must] show the absence of any substantial or radical changes in the assets or liabilities of the bankruptcy between the retrojection dates.” Id. Possibly another burden would be to show that the evidence relating to solvency at the time of the transfer was scant. Id. (evidence was scant).

6.2.2 Unreasonably small capital remaining

The Bankruptcy Code does not define unreasonably small capital. However, most courts hold that the definition indicates a financial condition short of insolvency. E.g., Murphy v. Meritor Sav. Bank ( In Re: O’Day Corp.), 126 B.R. 370, 407 (Bankr. D. Mass. 1991). However, the condition must be severe enough that it soon turns to, or severely threatens, insolvency; otherwise, the statute is overly broad. Vadnais Lumber Supply, Inc. v. Byrne (In re Vadnais Lumber Supply, Inc.), 100 B.R. 127, 137 (Bankr. D. Mass. 1989). Some cases have confused unreasonably small capital remaining with the third subsection, dealing with ability to pay expenses as they become due. See Pioneer Home Builders, Inc. v. International Bank of Commercie, Inc. (In re Pioneer Home Builders, Inc.), 147 B.R. 889, 894 (Bankr. W.D. Tex. 1972). While it is one method of reviewing capital, the method renders this provision meaningless, in light of the next sub-section, § 548(a)(1)(B)(iii), dealing directly with the debtor’s ability to pay. However, determining whether enough capital exists to continue the business would not be inappropriate or redundant. Joshua Slocum, Ltd. v. Boyle (In re Joshua Slocum, Ltd.), 103 B.R. 610, 625 (Bankr. E.D. Pa. 1989); In re Vadnais Lumber Supply, Inc., 100 B.R. at 131. In Vadnais, the Court held that the analysis must somehow be tied to insolvency. Since the standard is something less than insolvency, then it must somehow be tied to causing or inevitably leading to insolvency. Id.. Delving into the courts logic, one is faced with the conclusion that subparts (ii) and (iii) are strikingly similar.

6.2.3. Incurred debt beyond ability to pay

There is scant authority specifically referring to § 548(a)(2)(B)(iii). The language of this provision requires that the debtor intended to incur, or believe he would incur, debts that would be beyond his ability to pay. Bankruptcy Code § 548(a)(2)(B)(iii). Therefore, a fundamental issue is whether this provision applies at all in cases where the transfer is involuntary, especially when the debtor is admittedly solvent. All cases that do discuss the provision examine the intent of the debtor when the transfer was made. The provision requires an affirmative act by the debtor. The court in Hall v. Quigley (In re Hall), 131 B.R. 213, 218 (Bankr. N.D. Fla. 1991), held that involuntary transfers were not contemplated by § 548(a)(2)(B)(iii). Id. (reconciling with general “involuntary” language of § 548).

2. Standing to Sue Under Section 548

In examining this issue, one can distinguish defenses to these actions when they are brought prior to the confirmation of a plan of reorganization and post confirmation.

Prior to confirmation, the statute grants the federal fraudulent conveyance cause of action to trustees and debtors-in-possession, and therefore, a creditor generally does not have standing to prosecute an action for fraudulent conveyance. Gerken v. Harris (In re Auxano, Inc.), 87 B.R. 72 (Bankr. W.D. Mo. 1988); First State Bank of Wykoff v. Grell (In re Grell), 83 B.R. 652 (Bankr. W.D. Mo. 1988); Johston Memorial Hospital v. Hess (In re Hess), 21 B.R. 465 (Bankr. W.D. Va. 1982); see also Thompson v. Myers (In re Myers), C/A No. 97-10215-W, Adv. Pro. No. 98-80017-W (Bankr. D. S.C. 7/17/98) (finding that unsecured creditor did not have standing to bring action under Section 548 and stating that the proper party to bring such action was the Chapter 7 trustee). However, courts hold that an individual creditor can bring an action for recovery of an alleged fraudulent transfer provided they can show that the trustee or creditor's committee failed to zealously prosecute the action on behalf of estate. Canadian Pac. Forest Prod. v. J.D. Irving, ltd. (In re Gibson Group, Inc.), 66 F.3d 1436, 1442 (6th Cir. 1995); In re v. Savings Oil & Heating Co., Inc., 91 B.R. 655, 657 (Bankr. E.D.N.Y. 1988); In re Conley, 159 B.R. 323, 324 (Bankr. D. Idaho 1993).

In one case, Glinka v. Abraham and Rose Co, Ltd., 199 B.R. 484 (D. Vt. 1996), the court allowed a creditor and the trustee to jointly pursue a fraudulent conveyance action. The court found that by itself, the estate lacked the funds to pursue the claim, and that allowing the creditor to join the trustee imposed no net financial burden on the bankruptcy estate. Id. at 493.

So, generally speaking, prior to confirmation, the cause of action belongs to the trustee or debtor-in-possession, but in certain circumstances, other interested parties have been given the opportunity to bring this action.

After confirmation of a plan, the question is whether this cause of action was properly preserved. This defense started in cases that did not deal with avoidance actions. In Eubanks v. Federal Deposit Insurance Corp., 977 F.2d 166 (5th Cir. 1992), the court was examining a post confirmation lender liability claim brought by the reorganized debtor against his secured lender based upon the secured creditors pre-petition actions. The Court held because the secured lender was a creditor under the plan, his claim was determined by the confirmation of the plan and any challenge to this claim could have been brought prior to confirmation. Id. at 174. The court went on to hold that the confirmed plan was res judicata as to the lender liability action. Id. Similarly, in Browning v. Levy, 283 F.3d 761, 774 (6th Cir. 2002), the Sixth Circuit held that the plan’s “blanket reservation” of causes of action did not preserve a malpractice claim and breach of fiduciary duty claim against a law firm that was also a creditor of the debtor. Both the Fifth and Sixth Circuits seem to hold that Section 1123(b)(3) requires plans to provide for settlement, adjustment or retention of some entity to prosecute the claims belonging to the debtor. This plan requirement, combined with the disclosure statements requirement of “adequate information,” seem to require some notice as to what claims are being settled, adjusted or retained. Both the Fifth and Sixth Circuits held that the blanket reservation failed to provide the sufficient notice and therefore, the action was not retained.

Some bankruptcy courts have applied this same logic to preference actions. In the case of Mickey’s Enterprises, Inc. v. Saturday Sales, Inc. (In re Mickey’s Enterprises, Inc.), 165 B.R. 188 (W.D. Tex. 1994), the court was examining a preference action against a creditor of the estate. The court held that the preference action stemmed from the same nucleus of operative facts as the debtor’s proof of claim, the “existing and continuing business relationship.” Id. at 192. The court went on to hold that res judicata applied. As it relates to the same nucleus of operative facts, the superficial treatment of this analysis by this court suggests a lack of understanding of preference litigation. One only has to look at the elements of a preference action and compare them to an action on an invoice or open account to realize these two distinct legal theories do not stem from the same nucleus of operative facts.

Further, most Federal Courts do not even use the general term res judicata. Federal Courts examine the preclusive effects of prior determinations in terms of either claims preclusion or issue preclusion. See 18 Federal Practice and Procedure, § 4402, at 6 (1981) (“the distinctive effects of a judgment [are] separately characterized as ‘claim preclusion’ and ‘issue preclusion’”).

Claims preclusion has the “effect of foreclosing any litigation of matters that never have been litigated, because of a determination that they should have been advanced in an earlier suit.” Id.; see also Kaspar Wire Works, Inc. v. Leco Engineering & Mach., Inc., 575 F.2d 530, 535-36 (5th Cir. 1978). Under claims preclusion, a judgment does not preclude everything that may have been disputed between the parties, it only precludes matters within a certain sphere. 18 Federal Practice and Procedure, § 4406 , at 45 (1981). “Claim preclusion cannot extend beyond the limits of an action that can be brought before a single court.” 18 Federal Practice and Procedure, § 4407 at 51 (1981).

The contemporary approach uses a “transactional definition of a claim or cause of action” to determine the scope of claims preclusion. 18 Federal Practice and Procedure, § 4407 at 55 (1981); see also Restatement Second of Judgments, Section 24 (1981). Basically, a claim extinguished by a first judgment includes:

all rights of the plaintiff to remedies against the defendant with respect to all or any part of the transaction, or series of connected transactions, out of which the action arose. 18 Federal Practice and Procedure, § 4407, at 55 (1981); see also Restatement Second of Judgments, § 24 (1981).

Thus, the Court must examine the transactions associated with the claim, specifically the elements of the cause of action that would create the claim, and compare those with the elements of the cause of action or claim seeking to be precluded.

Issue Preclusion has the “effect of foreclosing relitigation of matters that have once been litigated and decided.” 18 Federal Practice and Procedure, § 4402, at 6 (1981); see also Kaspar Wire Works, Inc. v. Leco Engineering & Mach., Inc., 575 F.2d 530, 535-36 (5th Cir. 1978). Issue preclusion involves the determination of the following issues:

1. Issue preclusion arises in the second action on the basis of a prior decision when the same “issue” is involved in both actions;
2. The issue was “actually litigated” in the first action, after a full and fair opportunity for litigation;
3. The issue was “actually decided” in the first action, by a disposition that is sufficiently “final,” “on the merits,” and “valid”;
4. It was necessary to decide the issue in disposing of the first action and - in some decisions - the issue occupied a high position in the logical hierarchy of abstract legal rules applied in the first action;
5. The later litigation is between the same parties or involves non-parties that are subject to the binding effect or benefit of the first action;
6. The role of the issue in the second action was foreseeable in the first action, or it occupies a high position in the logical hierarchy of abstract legal rules applied in the second action; and
7. There are no special considerations of fairness, relative judicial authority, changes of law, or the like, that warrant remission of the ordinary rules of preclusion.

18 Federal Practice and Procedure, § 4416 at 138-39 (1981). Since the argument is that the avoidance action was not disclosed prior to the confirmation of the plan, it can hardly be argued that the preference action was actually litigated.

Thus, neither claims preclusion nor issue preclusion should be a basis upon which a court should hold that an avoidance action is not preserved by a blanket reservation. However, the requirement for adequate information provides a more difficult analysis.

In the recent case of Elk Horn Coal Co., L.L.C. v. Conveyor Mfg & Supply, Inc. (In re Pen Holdings, Inc.), 316 B.R. 495 (Bankr. M.D. Tenn. 2004), the Court was addressing a similar challenge against preference actions. In Pen Holdings, the plan defined “avoidance actions” as, among other things, the actions under sections 510, 541, 544, 545, 546, 547, 548, 550 and 553 of the Bankruptcy Code. Id. at 497. It then went on to retain the right to prosecute these avoidance actions. Id. The Middle Tennessee bankruptcy court found that the adequate information needed to retain actions was for creditors, not for defendants. Id. at 504. Therefore, naming specific defendants was not necessary. Id. That seems to be a pretty good argument. Adequate information means:

information of a kind, and in sufficient detail, as far as is reasonably practicable in light of the nature and history of the debtor and the condition of the debtor’s books and records, that would enable a hypothetical reasonable investor typical of holders of claims or interests of the relevant class to make an informed judgment about the plan ...

11 U.S.C. §1125(a)(1). So technically, adequate information is not directed at a creditor, it is directed at a “hypothetical reasonable investor typical of holders of claims.” Id. Clearly, adequate information is not directed toward defendants in avoidance actions.

The Pen Holding court found that avoidance actions are “fundamentally different” than the malpractice and breach of fiduciary duty claims found in Browning. 316 B.R. at 504. The court reasoned that they are fundamentally different because (a) they are so numerous that typically debtors do not even complete their preference analysis prior to proposing a plan and to require a debtor to do so is “not practicable,” (b) it is a common practice to simply preserve these actions in plans; and (c) nothing in Section 1123 requires that the matters be set out more specifically. Id. The court concluded that “preserving the value of preferences for distribution to creditors after confirmation should be easily accomplished in the plan without magic words or typographical traps.” 316 B.R. at 505.

Obviously, for an existing creditor, the first question that must be answered is whether or not the transfer was for valuable consideration. Valuable consideration means something more than nominal. Matthews v. Matthews, 35 S.E. 2d 157, 160 (S.C. 1945). Generally, in South Carolina, a contract need only mention consideration for it to be considered a bonafide exchange for value. However, under fraudulent conveyance law, the standard is higher, and courts will look past the four corners of the document to discern whether the exchange amounted to an arms length transaction. See First Citizens Bank and Trust Co. of South Carolina v. Scofield, 286 S.C. 520, 335 S.E. 2d 248, 249 (S.C. Ct. App. 1985) (for $5.00 and “Love and Affection” insufficient language to circumvent Statute of Elizabeth). Valuable consideration is the fair equivalent of the property conveyed. Additionally, any value given must inure to the benefit of the debtor in order to be considered. Dufresne v. Regency Realty, Inc.of Hilton Head Island, 366 S.E. 2d 256, 258 (S.C. Ct. App. 1987) (value given to someone other than the debtor does not count as consideration for fraudulent conveyance purposes); but see Royal 2 Lanes, Inc. v. Collins Holding Corp., 524 S.E. 2d 621 (S.C. 1999) (overruling Dufresne).

3.1.1. Fraudulent Intent

If valuable consideration was given, the creditor is forced to prove fraudulent intent. In usual circumstances,

fraudulent intent . . . can be shown only by a consideration of the attendant facts and circumstances, a resort to which must usually be had in order to distinguish between transactions which are bona fide, and those which are not. The Courts frequently must resort to evidence or circumstances which are not properly explained, when such circumstances lead to the belief that a fraudulent intent was present. . . . For fraud is not to be expected to seek the glare of day, or the presence of witnesses for its consummation. It is usually effected in secret, and it is only from circumstances [that it may be presumed].

Certain circumstances so frequently attend conveyances to defraud creditors that they are recognized and referred to as “badges of fraud.” These badges tend to excite suspicions as to the bona fides of a challenged conveyance. Unexplained, they may warrant an inference of fraud. Whether the inference is warranted depends in large measure on whether a satisfactory explanation is presented.

. . . Among the generally recognized badges of fraud are:

[1] insolvency or indebtedness of the transferor;

[2] lack of consideration for the conveyance;

[3] relationship between the transferor and the transferee;

[4] the pendency or threat of litigation;

[5] secrecy or concealment;

[6] departure from the usual method of business;

[7] the transfer of the debtor’s entire estate;

[8] the reservation of benefit to the transferor;

[9] retention by the debtor of possession of the property.

Although it has been said that a single badge of fraud may stamp a transaction as fraudulent, it is more generally held that one circumstance recognized as a badge of fraud may not alone prove fraud, where there is a concurrence of several such badges of fraud an inference of fraud may be warranted.

Coleman v. Daniel, 199 S.E.2d 74, 79-80 (S.C. 1973); Anderson v. Simchon (In re Southern Textile Knitters, Inc.), C/A No. 98-07203-W, Adv. Pro. No. 99-80026-W (Bankr. D. S.C. 7/28/00)

3.1.3. Imputing Knowledge of Grantee.

In order to set aside a fraudulent conveyance made where value is given, the creditor must show that the fraudulent intent of the debtor is imputable to the grantee. Sumner v. Janicare, Inc., 294 S.C. 483, 366 S.E. 2d 20, 21 (S.C. Ct. App. 1988). This requires that the transferee have knowledge or participate in the scheme, which can be proven by circumstantial evidence. SCNB v. Halter, 293 S.C. 121, 359 S.E. 2d. 74, 80 (S.C. Ct. App. 1987). Actual knowledge of, or participation in, the debtor’s fraudulent intention on the part of the transferee need not be established in order to justify a conclusion that the transaction was fraudulent. The transaction is subject to attack if at the time of the transfer the transferee had notice of circumstances which would arouse the suspicion of any ordinarily prudent man and cause him to make inquiry as to the purpose for which the transfer was being made, which would disclose the fraudulent intent of the maker. Coleman v. Daniel, 261 S.C. 198, 199 S.E. 2d 74, 80 (S.C. 1973). Knowledge on the part of a purchaser that the seller is indebted or insolvent has frequently been held sufficient to place a purchaser on notice and to require him to investigate. Id. The purchaser need not know of the specific debt that the creditor asserts is being hindered or prejudiced as a result of the transfer. Id.

Perhaps the most ambiguous element is the requirement that an existing creditor must prove that a transfer without consideration was voluntary. Under state common law, a voluntary conveyance is a transfer made without consideration or for a mere nominal consideration. Durham v. Blackard, 438 S.E. 2d 259, 263 (S.C. Ct. App. 1993). Where nominal or some amount of consideration is paid, the transfer is considered voluntary to the extent the value of the property is more than the consideration paid. Kirby v. Horne Motor Co., 366 S.E. 2d 259 (S.C. Ct. App. 1988).

3.2.2. Conveyance is voluntary

A voluntary conveyance is a transfer made in good faith without consideration or for a mere nominal consideration. Durham v. Blackard, 438 S.E. 2d at 263. “A voluntary conveyance which violates the statute [of Elizabeth] will be set aside to the extent of the value of the property transferred less any consideration received in exchange therefore.” Id.

3.2.3. Insolvency

When an existing creditor is showing that the grantor failed to retain sufficient property to pay the indebtedness to the plaintiff in full, they are in essence attempting to prove insolvency. The court in Gardner v. Kirven, 191 S.C. 814, 816 (1937) seems to suggest that the plaintiff needs to show that “[i]f in the final event the property of the debtor is not sufficient to pay his debts existing at the time of this voluntary conveyance, then such conveyance is null and void as to such debts.” Id. Clearly, the Garvin holding suggests that a creditor may show insolvency at the time the debt is sought to be collected. Garvin supports the position that in conveying property, debtor’s must retain sufficient property to satisfy their debts when they become due. The amount of property that must be retained “means a sufficient amount of property not merely at the time of the transfer, but an amount from which in the final analysis the creditors are able to collect their indebtedness in full.” Id.

In South Carolina, the discovery rule states that a cause of action to set aside an allegedly fraudulent transfer pursuant to the Statute of Elizabeth accrues, and the statute of limitations begins to run, upon the claimant’s “discovery of the fraud itself or of such facts as would have led to the knowledge thereof, if pursued with reasonable diligence.’” Campbell v. J. R. Deans Co. (In re JR Deans Co., Inc.), 249 B.R. 121, 132 (D.S.C. Bankr. 2000); Burgess v. American Cancer Society, 300 S.C. 182, 386 S.E.2d 798, 799 (S.C. Ct. App. 1989) ; Grayson v. Fidelity Life Ins., 114 S.C. 130, 103 S.E. 477, 478 (1920). “Under this objective test, one is charged with discovery when the facts and circumstances of an injury would put a person of common knowledge and experience on notice that some claim might exist.” Cline v. J. E. Faulkner Homes, Inc., 597 S.E.2d 27 (S.C. Ct. App. 2004) citing Austin v. Conway Hosp., Inc., 292 S.C. 334, 339, 356 S.E.2d 153, 156 (S.C. Ct. App. 1987).

The issue is one of notice. Some have argued that there is a bright line test in South Carolina to the effect that the rendering of a nulla bona return is when the plaintiff is first on notice. They base this argument on a limited reading of a 1962 case, Klein v. Kneece, 239 S.C. 478, 123 S.E.2d 870 (1962). But this suggestion of a bright line test requiring a nulla bona return is incorrect. Kneece’s requirement to “perfect” the cause of action via a nulla bona return was an incorrect reading of that case and later South Carolina cases do not require a nulla bona return to bring such an action.

The Kneece Court cited case law from decisions made in the 1800s - National Bank of Newberry v. Kinard, 28 S.C. 101, 5 S.E. 464 (1888); Verner v. Downs, 13 S.C. 449 (1880); and Suber v. Chandler, 18 S.C. 526 (1883)-all of which were later clarified and corrected by rules promulgated in 1930 by Temple v. Montgomery, 157 S.C. 85, 153 S.E. 640 (1930). The Temple Court recognized the misunderstanding generated by Suber v. Chandler, stating:

The language of Chief Justice Simpson, in Suber v. Chandler, 18 S.C. 526, was apparently misunderstood by the members of the bar, and perhaps by some of our very able Judges. In that case, the distinguished jurist, not discussing the necessity of showing a nulla bona return, but considering the question of when the plaintiff's right of action accrued, in the course of his remarks, said this:

5. Conclusion

Prosecuting and defending fraudulent conveyances can be a complex and difficult area. In bankruptcy, the actions can be brought under either bankruptcy law, Section 548, or using South Carolina statutory law referred to as the Statute of Elizabeth. While the elements under the bankruptcy code and South Carolina law are similar and in some instances almost identical, there are subtle differences.