CLAWBACK PERIODS
Nonbankruptcy Concept
Unfortunately, applicable nonbankruptcy law does exist in the Bankruptcy Code and alters the
clawback periods. The Bankruptcy Code provides that A . . . the trustee may avoid any transfer of
an interest of the debtor in property or any obligation incurred by the debtor that is avoidable under
applicable law by a creditor holding an unsecured claim . . .@10 Often, this provision was used for
fraudulent transfer actions under state law11 because many states incorporate the Uniform Fraudulent
Transfer Act=s (UFTA@) four-year clawback which is significantly greater than the two-year
clawback provided by the Bankruptcy Code.12 And, with the state=s clawback period being a greater
time period, the recovery should increase with the possible inclusion of more transfers B making it even
more worthwhile to the trustee and the estate
In years past, the creditors may have lifted their phones and called their attorney and asked how far
back a trustee may sue on behalf of the estate against avoidable transferees, and the simplest answer
would have been essentially two years under the federal law and as many as four (or more)13 years
under state law if there was a fraudulent transfer. But, even four years was not enough. Now, the time
frame for a clawback has been extended to six or even 10 years.
Expanded Clawback Provisions
Trustees have filed numerous lawsuits and expanded the same. Some of those expansions are listed in
Box 3 below. These are the statutes to which disputes arise.
Box 3
Avoidance Action
Clawback
Period
Time for Filing Action/
Fraudulent Transfer UFTA if State is
creditor
10 years, but states
may vary
546(a)(1)/ 544
Fraudulent Transfer if USA is creditor
6 years
546(a)(1)/ 544
Fair Debt Collections Practices Act
(AFDCPA@)
28 USC ' 3306(b)(2)
28 USC ' 3304(a)(1)
Fraudulent Transfer if USA is creditor
6 years
546(a)(1)/ 544
Fair Debt Collections Practices Act
(AFDCPA@)
28 USC ' 3306(b)(2)
28 USC ' 3304(b)(1)(B)
Right to File
Insolvent and no equivalent value
Became insolvent or could not pay
debts after transfer
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CONSUMER BANKRUPTCY JOURNAL
Fall 2016
National Association of Consumer Bankruptcy Attorneys