In re: Grant A Kendall, et al., v. Able Debt Settlement, Inc.

Citation:
No. 10-6056 (8th Cir. Dec. 9, 2010)
Tag(s):
Ruling:
Debtors' payments under a contract with a debt relief agency were not fraudulent conveyances under Bankruptcy Code section 548 even though (a) contract may have been illegal, void or voidable and (b) Debtors were not able to avoid filing for bankruptcy relief. Fact that contract for debt relief services may have been illegal, void and voidable under North Dakota law was irrelevant to question of avoidance. Relevant question was whether Debtors received "reasonably equivalent value" for the payments made to the agency.
Procedural context:
Appeal from bankruptcy court decision denying Trustee's request for avoidance of transfers pursuant to Bankruptcy Code section 548.
Facts:
Debtors entered into a contract with an agency that promised to assist Debtors in the compromise and settlement of their outstanding debts with the goal of assisting them in avoiding filing for bankruptcy protection. Trustee in bankruptcy sought to avoid payments made to the agency on the theory that such payments were fraudulent transfers under Bankruptcy Code section 548 because (a) the contract for debt relief services was illegal under North Dakota law and (b) Debtors were, ultimately, unable to avoid filing for bankruptcy protection.

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