Bankruptcy Avoidance Actions

One of the basic tenets of bankruptcy law is to allow similarly-situated creditors to share equally in the debtor's property.  Prior to and even after the filing of the debtor's bankruptcy petition, a creditor may receive payments or property from the debtor that allows the creditor to receive more than if the creditor had participated in the bankruptcy.  Bankruptcy law allows the bankruptcy trustee to set aside, or "avoid," these transfers and recover the payments, property or value of the property for the benefit of the other creditors.

A recent story in the Sioux Falls Argus Leader reported the filing of an adversary proceeding to avoid transfers of property and money made by Chapter 7 Debtor Kent Vucurevich.  In Trustee Lee Ann Pierce's complaint, several counts included allegations of "preference" payments of money and property to creditors.  In this type of avoidance action, money and property may be recovered for the bankruptcy estate regardless of the debtor's or creditor's motives, as long as the transfers occurred within a certain time before bankruptcy.  In another count of the complaint, Pierce alleged fraudulent transfers of the debtor's property, which requires her to prove that the debtor intended to "hinder, delay or defraud" creditors.  Bankruptcy courts recognize certain "badges of fraud," or factual indicators, as demonstrating the debtor's actual fradulent intent.

You may access the Adversary Complaint styled Pierce v. Vucurevich in In re Vucurevich, Bankr. No. 11-40501 in the United States Bankruptcy Court for the District of South Dakota through Pacer or Bloomberg Law.  For more information about docket research with Bloomberg Law and Pacer, see the McKusick Law Library Research Guide "Guide for Summer Interns and Associates."

For more information on the avoidance powers of a bankruptcy trustee, or about bankruptcy law in general, the McKusick Law Library contains many print bankruptcy resources, including Collier on Bankruptcy, 16th edition, Norton Bankruptcy Law and Practice, 3rd edition, and Bankruptcy Litigation and Practice: A Practitioner's Guide, 4th edition, by Thomas Solerno.  Collier is available on Lexis.com and Lexis Advance, and Norton's is available on WestlawNext.    

(This entry was originally written and posted by Marsha Stacey)