Bankruptcy Forms: Filing Bankruptcy Chapter 7 Bankruptcy Software Chapter 13

The Center For Debt Management
Center4DebtManagement.com ... Always open 24 / 7

Note: For affordable legal assistance The Center For Debt Management highly recommends Standard Legal's Do-It-Yourself Bankruptcy Forms Software Kits. For credit repair services,
the most trusted law firm in America with over 15 years of experience is Lexington Law Firm.

For more bankruptcy help and bankruptcy alternatives, go to Bankruptcy Resources



TITLE 11–BANKRUPTCY

CHAPTER 5–CREDITORS, THE DEBTOR, AND THE ESTATE

Sub Chapter III – The Estate

Sec. 550. Liability of transferee of avoided transfer


    (a) Except as otherwise provided in this section, to the extent that 
a transfer is avoided under section 544, 545, 547, 548, 549, 553(b), or 
724(a) of this title, the trustee may recover, for the benefit of the 
estate, the property transferred, or, if the court so orders, the value 
of such property, from--
        (1) the initial transferee of such transfer or the entity for 
    whose benefit such transfer was made; or
        (2) any immediate or mediate transferee of such initial 
    transferee.

    (b) The trustee may not recover under section (a)(2) of this section 
from--
        (1) a transferee that takes for value, including satisfaction or 
    securing of a present or antecedent debt, in good faith, and without 
    knowledge of the voidability of the transfer avoided; or
        (2) any immediate or mediate good faith transferee of such 
    transferee.

    (c) If a transfer made between 90 days and one year before the 
filing of the petition--
        (1) is avoided under section 547(b) of this title; and
        (2) was made for the benefit of a creditor that at the time of 
    such transfer was an insider;

the trustee may not recover under subsection (a) from a transferee that 
is not an insider.
    (d) The trustee is entitled to only a single satisfaction under 
subsection (a) of this section.
    (e)(1) A good faith transferee from whom the trustee may recover 
under subsection (a) of this section has a lien on the property 
recovered to secure the lesser of--
        (A) the cost, to such transferee, of any improvement made after 
    the transfer, less the amount of any profit realized by or accruing 
    to such transferee from such property; and
        (B) any increase in the value of such property as a result of 
    such improvement, of the property transferred.

    (2) In this subsection, ``improvement'' includes--
        (A) physical additions or changes to the property transferred;
        (B) repairs to such property;
        (C) payment of any tax on such property;
        (D) payment of any debt secured by a lien on such property that 
    is superior or equal to the rights of the trustee; and
        (E) preservation of such property.

    (f) An action or proceeding under this section may not be commenced 
after the earlier of--
        (1) one year after the avoidance of the transfer on account of 
    which recovery under this section is sought; or
        (2) the time the case is closed or dismissed.

(Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2601; Pub. L. 98-353, title III, 
Sec. 465, July 10, 1984, 98 Stat. 379; Pub. L. 103-394, title II, 
Sec. 202, Oct. 22, 1994, 108 Stat. 4121.)


                      Historical and Revision Notes

                         legislative statements

    Section 550(a)(1) of the House amendment has been modified in order 
to permit recovery from an entity for whose benefit an avoided transfer 
is made in addition to a recovery from the initial transferee of the 
transfer. Section 550(c) would still apply, and the trustee is entitled 
only to a single satisfaction. The liability of a transferee under 
section 550(a) applies only ``to the extent that a transfer is 
avoided''. This means that liability is not imposed on a transferee to 
the extent that a transferee is protected under a provision such as 
section 548(c) which grants a good faith transferee for value of a 
transfer that is avoided only as a fraudulent transfer, a lien on the 
property transferred to the extent of value given.
    Section 550(b) of the House amendment is modified to indicate that 
value includes satisfaction or securing of a present antecedent debt. 
This means that the trustee may not recover under subsection (a)(2) from 
a subsequent transferee that takes for ``value'', provided the 
subsequent transferee also takes in good faith and without knowledge of 
the transfer avoided.
    Section 550(e) of the House amendment is derived from section 550(e) 
of the Senate amendment.


                        senate report no. 95-989

    Section 550 prescribes the liability of a transferee of an avoided 
transfer, and enunciates the separation between the concepts of avoiding 
a transfer and recovering from the transferee. Subsection (a) permits 
the trustee to recover from the initial transferee of an avoided 
transfer or from any immediate or mediate transferee of the initial 
transferee. The words ``to the extent that'' in the lead in to this 
subsection are designed to incorporate the protection of transferees 
found in proposed 11 U.S.C. 549(b) and 548(c). Subsection (b) limits the 
liability of an immediate or mediate transferee of the initial 
transferee if such secondary transferee takes for value, in good faith 
and without knowledge of the voidability of the transfer. An immediate 
or mediate good faith transferee of a protected secondary transferee is 
also shielded from liability. This subsection is limited to the 
trustee's right to recover from subsequent transferees under subsection 
(a)(2). It does not limit the trustee's rights against the initial 
transferee under subsection (a)(1). The phrase ``good faith'' in this 
paragraph is intended to prevent a transferee from whom the trustee 
could recover from transferring the recoverable property to an innocent 
transferee, and receiving a retransfer from him, that is, ``washing'' 
the transaction through an innocent third party. In order for the 
transferee to be excepted from liability under this paragraph, he 
himself must be a good faith transferee. Subsection (c) is a further 
limitation on recovery. It specifies that the trustee is entitled to 
only one satisfactory, under subsection (a), even if more than one 
transferee is liable.
    Subsection (d) protects good faith transferees, either initial or 
subsequent, to the extent of the lesser of the cost of any improvement 
the transferee makes in the transferred property and the increase in 
value of the property as a result of the improvement. Paragraph (2) of 
the subsection defines improvement to include physical additions or 
changes to the property, repairs, payment of taxes on the property, 
payment of a debt secured by a lien on the property, discharge of a lien 
on the property, and preservation of the property.
    Subsection (e) establishes a statute of limitations on avoidance by 
the Trustee. The limitation is one year after the avoidance of the 
transfer or the time the case is closed or dismissed, whichever is 
earlier.


                               Amendments

    1994--Subsecs. (c) to (f). Pub. L. 103-394 added subsec. (c) and 
redesignated former subsecs. (c) to (e) as (d) to (f), respectively.
    1984--Subsec. (a). Pub. L. 98-353, Sec. 465(a), substituted ``549, 
553(b), or 724(a) of this title'' for ``549, or 724(a) of this title''.
    Subsec. (d)(1)(A). Pub. L. 98-353, Sec. 465(b)(1), inserted ``or 
accruing to'' after ``by''.
    Subsec. (d)(1)(B). Pub. L. 98-353, Sec. 465(b)(2), substituted ``the 
value of such property'' for ``value''.
    Subsec. (d)(2)(D). Pub. L. 98-353, Sec. 465(b)(3), substituted 
``payment of any debt secured by a lien on such property that is 
superior or equal to the rights of the trustee; and'' for ``payment of 
any debt secured by a lien on such property.''
    Subsec. (d)(2)(E), (F). Pub. L. 98-353, Sec. 465(b)(3), (4), struck 
out subpar. (E) ``discharge of any lien against such property that is 
superior or equal to the rights of the trustee; and'' and redesignated 
subpar. (F) as (E).
    Subsec. (e)(1). Pub. L. 98-353, Sec. 465(c), substituted ``or'' for 
``and''.


                    Effective Date of 1994 Amendment

    Amendment by Pub. L. 103-394 effective Oct. 22, 1994, and not 
applicable with respect to cases commenced under this title before Oct. 
22, 1994, see section 702 of Pub. L. 103-394, set out as a note under 
section 101 of this title.


                    Effective Date of 1984 Amendment

    Amendment by Pub. L. 98-353 effective with respect to cases filed 90 
days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out 
as a note under section 101 of this title.

                  Section Referred to in Other Sections

    This section is referred to in sections 106, 349, 502, 522, 541, 
901, 926 of this title.



Back Index Next

Note: For affordable legal assistance The Center For Debt Management highly recommends Standard Legal's Do-It-Yourself Bankruptcy Forms Software Kits. For credit repair services,
the most trusted law firm in America with over 15 years of experience is Lexington Law Firm.

For more bankruptcy help and bankruptcy alternatives, go to Bankruptcy Resources

Go to Index of Related Articles and Resources!

Click Below To Check Out More Financial Resources

Return to Top

The Center For Debt Management™

Helping Consumers Save Money and Reduce Debt Is Our Only Business!™

We invite you to explore the sectors listed below. We promise that you'll find exceptional values, offers and resources in which to reduce your living expenses and to enjoy life!


Debt Management and Financial Services! The Internet's oldest and most comprehensive debt management agency! Resources for debt management, consumer credit counseling, debt consolidation, debt reduction settlements, legal aid, financial aid, loans and financing, credit repair, credit reports, insurance quotes, income sources, tax assistance, and more.

Established in 1989 and serving the online community since 1992!


This site was created and designed by Daniel A. Gelinas
Disclaimer and Privacy Policy      © Copyright  2007 "The Center For Debt Management"      Contact Us
Return to Top

Legal Resource Center: United States Code TITLE 11 Filing Bankruptcy Forms Software