Chapter 27 - § 27.4 • PRE-PETITION TRANSFERS
| Jurisdiction | Colorado |
§ 27.4.1—Fraudulent Transfers
The trustee may avoid any transfer of an interest of the debtor in property, or any obligation incurred by the debtor, that was made or incurred on or within two years before the date of the petition, if the debtor voluntarily or involuntarily made the transfer or incurred the obligation with actual intent to hinder, delay, or defraud any entity to which the debtor was or became, on or after the date of the transfer was made or the obligation incurred, indebted; or received less than a reasonable equivalent in value in exchange for the transfer or obligation and was insolvent on the date that the transfer was made or the obligation was incurred, or became insolvent as a result of the transfer or obligation; or was engaged in business or a transaction, or was about to engage in business or a transaction, for which any property remaining with the debtor was an unreasonably small capital; or intended to incur, or believed that he or she would incur, debts that would be beyond his or her ability to pay as such debts matured.81 Except in limited circumstances, only a bankruptcy trustee, not an individual creditor, has standing to set aside a fraudulent conveyance after a bankruptcy petition has been filed.82
Transfer: The term "transfer" means the creation of a lien, the retention of title as a security interest, the foreclosure of the debtor's equity of redemption, or each mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing of or parting with property or an interest in property.83 A transfer is made when the transfer is so perfected that a bona fide purchaser from the debtor against whom applicable law permits the transfer to be perfected cannot acquire an interest in the property transferred that is superior to the interest in the property of the transferee.84 A noncollusive, regularly conducted foreclosure sale and issuance of a certificate of purchase is a transfer of an interest of the debtor in property, and is subject to avoidance if the statutory requirements are met.85
Transferee: An action to set aside a fraudulent transfer must name the transferee as a party.86
Exempt property: The fraudulent transfer statute applies to exempt property.87
Time: A transfer made more than the specified period before the date of the petition may not be set aside under the bankruptcy law, but may be set aside under Colorado law.88
Intent to hinder or delay: Not only is a conveyance illegal if made with an intent to defraud the creditors of the grantor, but it is equally illegal if made with an intent to delay them.89
Reasonably equivalent value: Where the debtor is insolvent, a foreclosure sale for less than a reasonably equivalent value may be avoided.90 Reasonable equivalence depends upon the facts of the case. Relevant considerations include the fair market value of the property at the time of the sale, the nature of the property in question and its relative marketability, and the number of persons appearing and bidding at the foreclosure sale.91 Courts have placed the greatest value on the disparity between the sale price and the fair market value of the property, and should compare the bid at foreclosure to the equity remaining in the property after subtracting the post-sale liens from the value of the property.92
§ 27.4.2—The "Strongarm" Statute
The trustee has, as of the commencement of the case, and without regard to any knowledge of the trustee93 or of any creditor, the rights and powers of, or may avoid any transfer of property of the debtor or any obligation by the debtor that is avoidable by:94
• A creditor that extends credit to the debtor at the time of the commencement of the case, and that obtains, at such time and with respect to such credit, a judicial lien on all property on which a creditor on a simple contract could have obtained such a judicial lien, whether or not such a creditor exists;
• A creditor that extends credit to the debtor at the time of the commencement of the case and obtains, at such time and with respect to such credit, an execution against the debtor that is returned unsatisfied at such time, whether or not such a creditor exists;
• A bona fide purchaser of real property, other than fixtures, from the debtor, against whom applicable law permits such transfer to be perfected, that obtains the status of a bona fide purchaser and has perfected such transfer at the time of the commencement of the case, whether or not such a purchaser exists.95
Despite any actual knowledge the trustee or the debtor may have, no such actual knowledge will be imputed to the trustee.96 The extent of the trustee's rights under the "strongarm" statute is measured by the substantive law of the jurisdiction governing the property in question.97 Thus, for example, the trustee has priority over (1) one with an unrecorded equitable interest in the property,98 (2) a wife's interest in her husband's property under a dissolution proceeding not appearing of record,99 and (3) a deed of trust executed by one not owning the property.100
§ 27.4.3—Voidable Preferences
With certain exceptions,101 the trustee may avoid any transfer102 of an interest of the debtor in property to or for the benefit of a creditor, for or on account of an antecedent debt owed by the debtor before the transfer was made, made while the debtor was insolvent...
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