Loan Forgiveness as Basis for Fraudulent Transfer Claims
Fraudulent transfer litigation is a valuable weapon in the bankruptcy code arsenal that is commonly used to target assets that were transferred or otherwise disposed of prior to the bankruptcy. These assets, if successfully recovered, have the potential to provide greater recovery, or at least some recovery, to creditors of the debtor's estate.
The last two years saw an uptick in the use of Chapter 11 purely to reorganize rather than to simply liquidate a debtor and its affiliates, which are commonly included as co-debtors. Additionally, Chapter 11 bankruptcy cases are being confirmed in records speeds. These corporate restructurings may be used to shed unprofitable business sectors, shift assets and liabilities among debtor entities and their non-debtor affiliates, and alter the rights of creditors in the blink of an eye.
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Lowenstein Sandler LLP by Jeffrey Cohen, Michael Kaplan, and Colleen Maker. Published August 26, 2021.