Section 548 lays out the Bankruptcy Code’s basis for a fraudulent transfer. Section 548 limits the period to 2 years immediately preceding the commencement of the Chapter 7 Bankruptcy case. However, there are some state based claims Chapter 7 trustees can sometimes latch on to and pursue
For example, in Minnesota, we have a fraudulent transfer statute (Minnesota Statute Section 513) which Chapter 7 trustees can use as the basis for pursuing a transfer outside of 2 years. Under this statute, if debtor transferred any assets for less than fair market value with the intent to hinder, delay, and defraud creditors, Chapter 7 trustee can pursue this claim against the recipient of the transfer.
Are there defenses to this kind of transfer? Yes, there is. Creditor or trustee must prove that debtor made the transfer to specifically hinder, delay, or defraud a creditor. For example, if 4 years before filing Chapter 7 bankruptcy, debtor gives her home to brother for free, but debtor had no debt at the time, she would argue that her transfer was not with the intent to hinder, delay, and defraud her creditors because she had no creditors at the time of the transfer.
Now, if debtor transferred her home to brother and she had 100k in credit card debt that would be more of a problem. But, what if debtor says I transferred the house to brother because she has terminal cancer? As you can see, there are more defenses in a state court claim than a claim based on Section 548 of the Bankruptcy Code. As always, hire only local bankruptcy attorneys who do nothing but Chapter 7 and Chapter 13 Bankruptcy work.
When the time is right, or when you are ready, reach out to a Minnesota bankruptcy law firm known for the best customer service experience of any other bankruptcy law firm at www.kainscott.com. You will be glad you did!