Philadelphia and Wilmington partner Andy Kassner and associate Joe Argentina published an article in The Legal Intelligencer titled, “Individual Creditor Given Standing to Pursue Fraudulent Transfer Claim in Chapter 13 Case.” The article discussed the decision by Judge Ashely M. Chan in In re Steven Rosenblum, which held that creditors could pursue a fraudulent transfer action on behalf of the estate, while the bankruptcy case was pending, in order to avoid transfers of property by Mr. Rosenblum to a friend and his father.
The court determined it had the power to grant derivative standing in chapter 13 cases and adopted a three-part test, which held that derivative standing is appropriate only if:
  1. The movement has alleged a colorable claim that would benefit the estate;
  2. The trustee has unjustifiably refused to pursue the claim itself; and
  3. The movant has obtained permission from the bankruptcy court to initiate the action on behalf of the estate.

The court held that the test had been satisfied and granted retroactive derivative standing to the plaintiffs to continue the fraudulent transfer litigation in the state court.

Andy and Joe conclude that “every day thousands of consumer filings require the courts to address real disputes between individuals that require significant legal analysis. These litigants deserve the same attention by the system, and in this case, they received it.”

Source: Legal Intelligencer
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