Settlement Agreement (Anticipating Fraudulent Transfer Challenges)
Summary
This template is a clause for use in the representations and warranties section of a settlement agreement. This clause addresses the risk of potential fraudulent transfer challenges to the settlement payment. This template includes practical guidance and drafting notes. A transfer of the debtor's property to another party in order to deter, hinder, or defraud a creditor or to unfairly place such property out of the reach of a creditor is a fraudulent transfer. In bankruptcy cases, a trustee is given the power to set aside or avoid these transfers under either federal law or state law. Section 548 of the Bankruptcy Code provides for the federal statutory basis to challenge fraudulent transfers. Section 544 of the Bankruptcy Code provides for the basis to challenge fraudulent transfers under applicable state statutory law. A party receiving payment under a settlement agreement risks avoidance of the payment in bankruptcy, either as a fraudulent transfer or as a preferential transfer. For ...