Case Summary:
Trustee sought to avoid certain alleged fraudulent transfers under 11 U.S.C. §§ 544 and 548. The corporate debtor made payments on the home mortgage of its sole principal and officer totaling some $14,000 over the four years prior to bankruptcy. The trustee contended that the debtor did not receive “reasonably equivalent value” for the transfers. The debtor’s principal argued that the payments were a portion of his compensation. In general, payments on behalf of a third party can be avoided in bankruptcy unless there was a clear benefit (or “value”) to the debtor. The principal took no salary or compensation from the debtor companies; the court concluded that the payments constituted a pattern of compensation and that the debtor received an “indirect benefit” from the payments.

Statute/Rule References:
11 U.S.C. § 544 -- Trustee as Lien Creditor
11 U.S.C. § 548 -- Fraudulent Conveyance

Key Words:
Trustee as Lein Creditor
Fraudulent Conveyance