Court Limits a 'Self-Settling Trust or Similar Device' to an Express Trust


In In re Porco Inc., the Bankruptcy Court for the Southern District of Illinois in a March 30 opinion addressed an issue of apparent first impression: whether a resulting or constructive trust is a "self-settling trust or similar device" subject to the trustee's avoidance power under § 548(e). In holding that the "similar device" clause is limited to express trusts, the court significantly limited the scope of a trustee's power to avoid and recover transfers by or on behalf of a debtor to a related third party.

Background of the Doctrine

Section 548(e) is composed of four elements that must all be met in order for the trustee to avoid transfers by the debtor made within 10 years before the debtor's bankruptcy petition is filed...

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