Eighth Circuit Holds Consumer Payments To Debt Settlement Company Not Avoidable In Bankruptcy Where “Reasonably Equivalent Value” Was Provided

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The Eighth Circuit Court of Appeals Bankruptcy Panel has upheld a North Dakota federal district court’s ruling that payments to a debt settlement company were not avoidable as “fraudulent transfers” in a Chapter 7 bankruptcy proceeding.

In Kendall v. Able Debt Settlement, Inc., No. 10-6056 (B.A.P. 8th Cir. December 9, 2010), the appellate court agreed with the lower court’s determination that the agreement was “an arm’s length transaction between a willing buyer and willing seller, was entered into in good faith and for fair market value.”

The case was brought by a bankruptcy trustee who sought to recover $1,708.37 in service fees paid by Grant and Andrea Kendall to Able Debt Settlement, Inc. from February 2008 to February 2009. The trustee argued that the debt settlement services were prohibited by North Dakota’s “debt adjusting” law and that the program’s purpose of avoiding bankruptcy was impossible to accomplish.

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