1. AUTOMATIC STAY
1.1 Covered Activities
1.2 Effect of Stay
1.3 Remedies
2. AVOIDING POWERS
2.1 Fraudulent Transfers
2.1.a Imposition and payment of a tax penalty is not a fraudulent transfer. While insolvent, the debtor incurred and paid tax penalties before bankruptcy. A transfer of property of the debtor while the debtor was insolvent for less than reasonably equivalent value is avoidable as a constructively fraudulent transfer. By referring to an exchange for value and defining when a transfer is made as when it takes effect between the parties, the UFTA does not contemplate involuntary obligations such as tax penalties. Therefore, the UFTA does not apply to a tax penalty. Cook v. U.S. (In re Yahweh Center, Inc.), 27 F.4th 960(4th Cir. 2022).
2.2 Preferences
2.2.a First cousins are "relatives." The trustee sued a first cousin of the debtor's principal to avoid as a preference a transfer made more than 90 days before the petition date. Section 547(b) permits the trustee to avoid a transfer to a "relative" made within one year before the petition date. The Bankruptcy Code defines "relative" as one within the third degree of affinity or consanguinity as determined by the common law. Courts have generally used state, not federal, law, but are divided on whether to use state common or civil law. Because of the ambiguity in the definition, the court may look to legislative history. The definition derives from the Bankruptcy Act of 1898 with no meaningful revision. The legislative history of that act shows that Congress intended reference to the common law of England, and case law supports that interpretation. Using...
