Defending Avoidance Actions With Solvency

Law360, New York (February 8, 2008, 12:00 AM EST) -- Recent bankruptcy decisions have highlighted the role of market evidence in measuring the solvency of bankruptcy debtors.

Debtors in bankruptcy (and trustees or unsecured creditors' committees acting on behalf of a bankruptcy estate) often invoke the Bankruptcy Code's avoidance powers – generally, the fraudulent transfer and preference provisions – to demand the return of certain payments and other transfers made before a bankruptcy filing, typically for redistribution to the unsecured creditors of the bankruptcy estate on a pro rata basis.

In most cases, however, the recipient...
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