In a recent decision, the U.S. District Court for the Southern District of Florida reversed the 2009 bankruptcy court ruling in In re TOUSA Inc., and held that temporarily forestalling bankruptcy can constitute reasonably equivalent value in the context of a fraudulent transfer claim under §548 of the Bankruptcy Code.1 The decision below sent shock waves throughout the capital markets and institutional lending community when the U.S. Bankruptcy Court for the Southern District of Florida clawed back as fraudulent transfers approximately $420 million in loans that were intended to stave off the impending bankruptcy of home builder TOUSA Inc. The District Court’s reversal of the Bankruptcy Court’s decision has provided much-needed clarity in the law related to fraudulent transfers and represents a clear win for secured lenders and distressed companies alike.
Fraudulent Transfers
The Bankruptcy Code provides a number of tools to avoid and recover prepetition transfers that favor one creditor to the detriment of the debtor’s other creditors, including Bankruptcy Code §§548 and 550.
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