Cite as: Keith M. Lundin, Lundin On Chapter 13, § 50.6, at ¶ ____, LundinOnChapter13.com (last visited __________).
BAPCPA made many adjustments to the rules for recovery of fraudulent transfers in bankruptcy cases. At least three of the changes may affect Chapter 13 practice.
1. Longer look-back. The general look-back period for the recovery of fraudulent transfers under § 548(a)(1) was expanded by BAPCPA from one year to two years. This provision has a unique effective date: the look-back period expands to two years for cases commenced one year after the date of enactment—cases commenced after April 20, 2006.1
2. Employment contracts. BAPCPA defined a new fraudulent transfer to or for the benefit of an insider under an employment contract not in the ordinary course of business.2 Probably aimed at “golden parachute” contracts, this new fraudulent transfer does not require that the transferor be insolvent and could be used even against a consumer debtor who received unreasonable distributions or compensation from a failed business within the two years before bankruptcy.
3. Ten-year look-back. There is a new subsection (e) in § 548 which allows the trustee to look back 10 years to avoid transfers to self-settled spendthrift trusts when the debtor was a beneficiary. This new fraudulent transfer recovery power was effective in cases commenced after April 20, 2005.3 The transfer must be to a “self-settled trust or similar device.”4 It must be a transfer by the debtor, and the debtor must be a beneficiary of the trust. Actual intent to hinder, delay or defraud a creditor is required. The long look-back on this new avoidance power will require all consumer debtors to reveal in the statements and schedules or on questioning at the meeting of creditors transfers into self-settled trusts within the 10 years before the Chapter 13 petition.5
1 See Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, Pub. L. No. 109-8, § 1402(b)(2), 119 Stat. 23 (2005).
2 11 U.S.C. § 548(a)(1)(B)(ii)(IV).
3 Pub. L. No. 109-8, § 1406(b)(1), 119 Stat. 23 (2005).
4 11 U.S.C. § 548(e)(1)(A).
5 See Official Form 7 (question 10b), discussed in § 383.1 [ Statement of Financial Affairs after BAPCPA ] § 36.23 Statement of Financial Affairs after BAPCPA.