No Equitable Tolling of 11 U.S.C. § 548’s Two-Year “Look-Back”

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Section 548(a) of the Bankruptcy Code allows a debtor to avoid certain transfers of property as ‘fraudulent transfers’ provided that such transfers took place “within 2 years before the date” of a bankruptcy filing.  11 U.S.C. § 548(a).  This two-year period is generally referred to as the ‘look-back’ period.

On January 24, 2012, Judge Brendan L. Shannon of the U.S. Bankruptcy Court for the District of Delaware ruled that section 548’s two-year look-back period is not subject to the doctrine of equitable tolling.  Meaning, even if a recipient of a transfer of a debtor’s property took some action to prevent a debtor from becoming aware that a fraudulent transfer claim under section 548 existed against such recipient, so long as the transfer of property took place outside of the two-year look-back period, the debtor could not pursue a claim under section 548.  See Industrial Enterprises of America, Inc. v. Burtis et al (In re Pitt Penn Holding Co., Inc., et al.), Adv. No. 11-51868, 2011 Bankr. LEXIS 5260 (Bank. D. Del 2012).

In In re Pitt Penn, the debtor Industrial Enterprises of America, Inc. commenced an adversary proceeding against certain defendants to recover property transferred from the debtor in the years before its bankruptcy.  Among other causes of action, the debtor asserted claims based on Bankruptcy Code section 548.  Initially, the bankruptcy court dismissed the section 548 claims because the debtor filed its petition on May 1, 2009, and the allegedly fraudulent transfers took place on February 6, 2007.  Based on the two-year look-back period, the transfers happened outside of the window set forth in Bankruptcy Code section 548.

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Published In: Bankruptcy Updates, Civil Procedure Updates, Finance & Banking Updates, Residential Real Estate Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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