Bankruptcy Law, The Law of Debtors and Creditors Problem Set Answers, Warren Westbrook Sixth Edition - Problem Set 30

Problem Set 30, p.572

30.1

• Who is the debtor? Be Well.
• Is it a fraudulent transfer? What is the transfer? §548(a)(1)(B) no REV + insolvent.
• The company gave away $4K and did not get any benefit.
• What is the remedy? Can Be Well recover from the cruise company?

• Is Burt the courier or the initial transferee? He is the latter.
• So Be Well cannot recover $4K from the cruise company, because the cruise company has the good faith defense.

• Should we separate Burt and his family’s share of cruise? Can we treat it as a kind of compensation for the management? So then the cruise company is an aider or abettor?

30.2

• To file a petition in Ch 11?
• Is it a FC? (a)(1)(B) no REV + insolvent;
• Remedy: you reject the K and you cannot get the paid money back; FCC will not issue a license
• The debtor can apply for a new license for 1 billion; FCC cannot discriminate it, see 525(a)

30.3

• Is the first transfer between the debtor and Sure Fire a FC? Yes, it is, because of no requirement for good faith for the initial transferee.
• What is the remedy for TIB? He can get the building back or the value. Here the property went to the third party. Under §550, he can only get the value.
• Under §550(b) TIB cannot bring a suit against Eric Wang to recover the property or its value.

• Wang paid the value in good faith
• He did not know the voidability
• He was not the initial transferee..

• If Mr. Wang was in bad faith, the debtor can get the building back.
• How much can the debtor get for the value of the building from Sure Fire?

• The value at transfer or the value today? Not clear.
• UFTA says the value at transfer

• Improvement: Under §550(e)(1) Sure Fire was also entitled to the lesser of 1) the cost of improvement or 2) increase in value; here the lesser is $10,000 increase in value. Sure Fire can offset $100K, rather than $300K.

30.4.

• To file an involuntary bankruptcy against Held.
• TIB then avoid the auction for a FC under (a)(1)(B) no REV + insolvent;
• Then CI can be paid pro rata.
• BFP says that it is a FC; it is not conclusive because not many people showed up; open to the public sale
• But the buyer can argue that at non-collusive auction (public foreclosure sale) is not a fraudulent transfer. Sometimes this holding doesn't make much sense. But there it is. This isn't a fraudulent transfer.

Problem Sets: Table of Contents

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