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Recent Developments in New York Regarding Bankruptcy

A bankruptcy court in New York ruled that a church had to turn over tithes it received from a couple during the year preceding the filing of a bankruptcy petition since the tithes represented a "fraudulent transfer" for less than "reasonably equivalent value."

New York
State:
Key point. A bankruptcy trustee has the legal authority to recover donations made by church members within one year prior to the filing of a bankruptcy petition. This authority does not violate the first amendment guaranty of religious freedom.

A bankruptcy court in New York ruled that a church had to turn over tithes it received from a couple during the year preceding the filing of a bankruptcy petition since the tithes represented a "fraudulent transfer" for less than "reasonably equivalent value." A couple contributed $5,200 to their church during the year preceding the filing of a bankruptcy petition. A bankruptcy trustee later asserted that these contributions had to be returned to the bankruptcy court on the ground that they represented fraudulent transfers. Under federal law, a bankruptcy trustee can recover transfers made by a bankrupt debtor during the year prior to filing ...

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Posted:
  • March 2, 1998

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