Norton Bankruptcy Law Advisor: TOUSA World: Everything You Know About Fraudulent Conveyance Law Is Wrong (Maybe)

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We are disconcerted when we discover that propositions of fact or law upon which we base our world or legal views are wrong, fundamentally and basically wrong. The ruling by the United States Bankruptcy Court for the Southern District of Florida in Official Committee of Unsecured Creditors of TOUSA, Inc. v. Citicorp North America, Inc. (In re TOUSA, Inc.),1 left experienced transactional lawyers and bankruptcy practitioners disconcerted and even disoriented. Looking with hindsight at a large refinancing transaction, the TOUSA bankruptcy court applied a literal, narrow reading of "reasonably equivalent value" in 11 U.S.C.A. § 548, and then read § 550 expansively to conclude that the payment of loan proceeds advanced by the Citigroup Lenders to the Transeastern Lenders from a loan secured by the assets of the TOUSA affiliates was avoidable under §§ 548 and 550 of the Bankruptcy Code.

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