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  the debtor transferred the essential assets of the business to a lienor who transferred the assets to
                       an insider of the debtor.


               The fraud may also be constructive under 11 USC 548(a)(1)(B) if the debtor received less than a "rea-
               sonably equivalent value"  fn 17   in exchange for such transfer or obligation and one of the following is
               true regarding the debtor’s financial condition:

                     The debtor was insolvent on the date the transfer was made or the obligation was incurred or be-
                       came insolvent as a result of such transfer or obligation.


                     The debtor was engaged in business or a transaction, or was about to engage in business or a
                       transaction, for which the remaining property of the debtor was an unreasonably small capital.

                     The debtor intended to incur, or believed that it would incur, debts that would be beyond the
                       debtor’s ability to pay as such debts matured.  fn 18


               Determinations with respect to what constitutes "reasonably equivalent value" are a matter of fact and
               are frequently the subject of dispute. This is, in part, because the concept of reasonably equivalent value
               is not defined by the Bankruptcy Code. Consequently, the evaluation of whether reasonably equivalent
               value was received in exchange for a transfer is not uniform across different jurisdictions. As an exam-
               ple, in some jurisdictions, only the direct benefits that are exchanged by the parties are valued and com-
               pared, whereas in others, both direct and indirect benefits are required to be measured and considered.
               Practitioners providing services related to assessment of reasonably equivalent value should consult with
               legal professionals to understand what standards are applied in the relevant locality. For additional dis-
               cussion of the performance of reasonably equivalent value analyses, refer to volume 2 of this practice
               aid, Valuation in Bankruptcy.

               Practitioners may be asked to perform solvency and financial analyses to assist in evaluating the three
               tests regarding the debtor’s financial condition, as discussed. This practice aid does not address perfor-
               mance of such analyses, which are covered in detail in volume 2 of this practice aid.

               As noted previously, 11 USC 544(b) permits the trustee to avoid any transfer that is voidable under ap-
               plicable law by a creditor. This clause has particular significance for fraudulent transfers, due to varia-
               tions between applicable state laws and 11 USC 548. The vast majority of states have adopted either the
               UFTA or the Uniform Fraudulent Conveyance Act (UFCA). For example, in states adopting the UFTA,
               "a debtor who is generally not paying his [or her] debts as they become due is presumed to be insolvent"
               fn 19   — a standard not included in 11 USC 548. Likewise, in states adopting the UFCA, transfers made
               more than two years prior to the petition date may be considered. Practitioners providing services related





        fn 17   Reasonably equivalent value is not defined by the Bankruptcy Code. However, 11 USC 548(d)(2)(A) defines "value" for the pur-
        poses of Section 548 to mean property, or satisfaction or securing of a present or antecedent debt of the debtor, but does not include an
        unperformed promise to furnish support to the debtor or to a relative of the debtor.

        fn 18   A transfer or obligation would also be fraudulent under 11 USC 548(a)(1)(B) if the debtor received less than reasonably equiva-
        lent value and the debtor made such transfer to or for the benefit of an insider, or incurred such obligation to or for the benefit of an
        insider, under an employment contract and not in the ordinary course of business.

        fn 19   See Section 2(b) of the Uniform Fraudulent Transfer Act (UFTA).


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