Settlement Agreement for Avoidance Actions
(Bankruptcy Rule 9019)

Summary

This template settlement agreement is for use in a bankruptcy case to settle an avoidance action pursuant to Bankruptcy Rule 9019. This template includes practical guidance, drafting notes, alternate clauses, and optional clauses. This settlement agreement is between a Chapter 11 debtor and the recipient of avoidable transfers. Avoidance actions generally allow the estate to recover certain pre-petition transfers and obligations. These actions arise under Chapter 5 of the Bankruptcy Code and include, among others, preference actions under Section 547 and fraudulent conveyance actions under Sections 544 and 548. Section 550 authorizes the recovery of the avoided transfers or obligations. For information on avoidance actions, see Preferences, Fraudulent Transfers, and Fraudulent Conveyances versus Preference Actions. This template settlement agreement is subject to court approval under Bankruptcy Rule 9019. Bankruptcy Rule 9019 generally requires that all proposed settlements of claims be made by motion after notice and a hearing. For more information, see Rule 9019 Settlement Agreements. Note that a motion to approve the settlement under Bankruptcy Rule 9019 is not always required. In some cases, the court will enter an order approving procedures that allow the debtor or a post-confirmation trustee to settle avoidance actions without further court order (but the settlement is still deemed approved by the court). For a template settlement agreement between a post-confirmation trust and a defendant (without the need for court approval), see Settlement Agreement for Avoidance Actions (Post-Confirmation Trust). For additional resources for attorneys representing a party in a Chapter 13 bankruptcy case, see Individual Chapter 13 Bankruptcy Resource Kit. For a full listing of key content when litigating disputes in bankruptcy cases, see Bankruptcy Litigation Resource Kit. For content for government attorneys who practice bankruptcy, see Government Attorneys Bankruptcy Resource Kit. For a treatise discussing this topic, see Collier on Bankruptcy P 9019.01.