Section 6.26 Actual Intent to Hinder, Delay, or Defraud

• Library: Bankruptcy Practice (2007 Ed. + 2015 Cum Supp)

A. (§6.26) Actual Intent to Hinder, Delay, or Defraud

A transfer of the debtor’s property is fraudulent if it was made with actual intent to hinder, delay, or defraud a creditor. 11 U.S.C. § 548(a)(1)(A). Courts are split on the evidence required to establish actual intent to defraud. For example, the Eighth Circuit noted that a trustee rarely uses direct evidence to establish actual intent to defraud. In re Sherman,67 F.3d 1348, 1353 (8^th Cir. 1995). Therefore, courts that do not require direct evidence infer actual intent from the circumstances surrounding the transfer. Id.; see also In re Fitzpatrick, 73 B.R. 655, 657 (Bankr. W.D. Mo. 1985) (Stewart, C.J.). On the other hand, other courts hold that the trustee must present proof that a creditor was actually harmed. See, e.g., Bear, Stearns Sec. Corp. v. Gredd, 275 B.R. 190 (S.D.N.Y. 2002).

In establishing actual intent, the trustee may prove that the debtor had the intent to hinder, delay, or defraud. In re SunSport, Inc., 260 B.R. 88, 112 (Bankr. D. Va. 2000). The trustee can establish the existence of a fraudulent transfer by proving any one of the three different intents. Id. In the Eighth Circuit, permitting the use of circumstantial evidence to establish actual intent, courts assess the surrounding circumstances by the presence of certain “badges of fraud.” Sherman, 67 F.3d at 1354. Courts in the Eighth Circuit apply the codified “badges of fraud” as found in Missouri law, § 428.024.2, RSMo 2000, to determine whether the debtor possessed the...