In an important recent decision, In re Champion Enterprises Inc., the U.S. Bankruptcy Court for the District of Delaware held that payments made and collateral granted on account of valid third-party antecedent debt, while potentially preferential, are per se not fraudulent transfers. Prior to the Champion decision, courts outside of the Southern District of New York had nearly uniformly applied a more flexible "facts and circumstances test" to such transfers.
The following article, "Delaware Court 'Champions' Per Se Rule for Constructive Fraudulent Transfers," published by Brian M. Resnick and Darren S. Klein in the December/January 2011 issue of the American Bankruptcy Institute Journal, examines the scope and implications of the per se rule and the facts and circumstances test through the lens of the Champion decision. The article surveys the opinions of courts following each rule and discusses the practical implications for lenders assessing their fraudulent transfer risk under each regime.
Click here for a copy of the article.