Douglas F. Mann v. LSQ Funding Group, L.C.

Sections 544 and 548 of the Bankruptcy Code provide that a trustee may recover a transfer made by the debtor with the actual intent to defraud any creditor if the transfer involves “an interest of the debtor in property.” Fraudulently transferred property recovered by the trustee is property of the debtor’s estate and for the benefit of creditors generally. See 11 U.S.C. § 541(a)(3). The question presented, on which courts of appeals are in conflict, is: when a debtor defrauds a new creditor into making payment of an existing creditor’s claims, whether the trustee seeking to avoid the fraudulent transfer also must demonstrate “diminution” or “harm” to the estate or creditors generally.