This paper discusses the various methods for attacking pre-bankruptcy transfers of non-exempt property pursuant to property distribution orders.
Generally, § 541 of the Bankruptcy Code governs what is included in the estate of a debtor. The interest held by the debtor at the commencement of the bankruptcy case determines what title and rights the estate receives. In re DeLauro, 207 B.R. 412, 415 (Bankr. D. N.J. 1997). Transfers of property from one spouse to another, or between former spouses, have traditionally been considered highly suspicious when made shortly before a debtor’s bankruptcy filing. When property is transferred shortly before filing, fraud becomes a consideration. The trustee has three possible tools with which to challenge questionable transfers made in accordance with a dissolution property settlement prior to the debtor’s filing: (1) avoidance as a preference under § 547; (2) as a fraudulent transfer under § 548; and (3) as a fraudulent transfer under state law through §544.
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