- Sixth Circuit affirmed original decision of the bankruptcy court and reinstated its award of $47,635.27 to the chapter 7 bankruptcy estate for fraudulent transfers arising out of a divorce separation agreement.
- Procedural context:
- Bankruptcy trustee appealed decision of Sixth Circuit Bankruptcy Appellate Panel ("BAP") which had reversed, in part, order of bankruptcy court that had awarded appellant, chapter 7 trustee, judgment of $47,635.27 against debtor's ex-husband as the recipient of fraudulent transfers arising out of a separation agreement in the couple's divorce.
- Debtor and husband entered into a separation agreement in connection with their divorce. Under the agreement, the debor retained her pension in the amount $18,000 and assumed liability for a $28,000 loan from her parents and $60,000 in credit card debt. The defendant, ex-husband, received the marital home with approximately $27,500 in equity. Approximately 6 months later, the debtor filed volunatry chapter 7 case. The chapter 7 trusutee sought to avoid the transfers by the debtor under the separation agreement as constructively fraudulent arguing that the debtor received less than reasonably equivalent value in exchange for her transfer of the marital assets and her assumption of debt. The Bankruptcy Court agreed and ordered the defendant, ex-husband, to pay $47,635.27 (1/2 of the credit card debt + 1/2 of the loan from the debtor's parents + surplus defenant received from the debtor's exchange of her interest in the home for her $18,000 pension). The BAP agreed that there was a fraudulent transfer but limited the amount to $4,532.98 because it found that the debtor did not benefit the defendant, ex-husband, by assuming the credit card debt inasmuch as the husband was not contractually liable on the credit card debt or the loan from the parents. The Sixth Circuit looked to the net effect of the transfer to the estate and more specifically on the remaining funds available to the unsecured creditors as a result of the transfers. The Sixth Circuit held that the credit card debt and loan from the debtor's parents were incurred during the marriage and used for marital purposes and that under Ohio law the defendant was equally liable for the debt.
- Keith, Clay and Kethledge (Keith, dissenting).
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