Page 57 - Bankruptcy Volume 1

1. the later of

a. two years after the entry of the order for relief; or

b. one year after a first trustee is appointed, provided the appointment was made within two
years of the entry of the order for relief; or

2. the time that the case is closed or dismissed.

To the extent transfers are avoided pursuant to sections 544, 545, 547, 548, 549, or 553(b), the trustee is
further granted the power by 11 USC 550 to recover the property transferred or the value of such proper-
ty for the benefit of the estate. Such recoveries may be made from the initial transferee, from the entity
for whose benefit such transfer was made, or in some circumstances fn 4 from an immediate or mediate
transferee of such transferee. To prevent a trustee from recovering on behalf of the estate the value of
the transferred property multiple times from each transferee, the trustee is barred from recovering more
than a single satisfaction of its claim. Actions brought to recover property from transferees are subject to
a different statute of limitations than described in 11 USC 546 and must be brought prior to the earlier of
one year after a transfer is avoided and the date the bankruptcy case is closed or dismissed.

Although described as trustee powers, the Bankruptcy Code also permits use of avoidance powers by a
debtor-in-possession fn 5 or a duly authorized representative of the estate postconfirmation. fn 6 In in-
stances where the trustee or debtor-in-possession fails to pursue an avoidable transfer and such failure
cannot be reasonably justified, the creditors’ committee may also seek permission from the court to
wield this authority. Notwithstanding that these parties may also exercise avoidance powers, for purpos-
es of this chapter the authority to exercise avoidance powers is described as residing with the trustee.

The power of the trustee or the debtor-in-possession to initiate avoidance actions serves as an important
safeguard to commerce involving distressed businesses. Avoidance powers both ensure that prepetition
and postpetition actions by debtors and their creditors will not result in inequitable distribution of the
debtor’s assets postpetition and deter creditors from employing collection tactics in anticipation of bank-
ruptcy that might accelerate a bankruptcy filing.

fn 3 11 USC 549 contains its own statute of limitations on postpetition transactions. Such actions must be commenced prior to the ear-
lier of two years after the date of the transfer at issue and the time at which the case is closed or dismissed.

fn 4 11 USC 550(b) elaborates that the trustee may not recover from any mediate or immediate transferees of the initial transferee if
such subsequent transferees were transferred the property in good faith for value without knowledge of the voidability of the transfer.
Likewise, 11 USC 550(c) prohibits recoveries from subsequent transferees in the case of preferential transfers to insiders made be-
tween 90 days and 1 year preceding the filing.

fn 5 11 USC 1107(a), which describes rights, powers, and duties of a debtor-in-possession, makes these powers exercisable by the
debtor-in-possession as well. In particular, it states: "Subject to any limitation on a trustee serving in a case under this chapter, and to
such limitations or conditions as the court prescribes, a debtor-in-possession shall have all the rights, other than the right to compensa-
tion under 11 USC 330 of this title, and powers, and shall perform all the functions and duties, except the duties specified in sections
1106(a)(2), (3), and (4) of this title, of a trustee serving in a case under this chapter."

fn 6 11 USC 1123(b)(3)(B) permits that a plan may provide for "the retention and enforcement by the debtor, by the trustee, or by a
representative of the estate appointed for such purpose, of any such claim or interest."

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