BFP Case

United States Supreme Court case holding that the price received from a high bidder at a regularly conducted foreclosure sale of real estate held in accordance with applicable state law conclusively establishes “reasonably equivalent value” and, therefore, prevents such a sale from being a constructively fraudulent transfer.

The court in BFP affirmed the lower courts’ rulings that the sale could not constitute a fraudulent transfer under Section 548 even though the amount bid at the sale was $433,000 and there was evidence that the property was worth $725,000 at the time of the sale. The court also criticized the holdings of Durrett and similar cases that had compared the sale price at foreclosure with a property’s “fair market value” in determining whether a foreclosure bid price constituted “reasonably equivalent value.”

The BFP holding does not extend to personal property foreclosures under the UCC, as the court emphasized that its decision applied only to real estate mortgage foreclosures and noted that considerations relating to other forced sales may be different.

Bankruptcy Code § 548. See also Durrett Case, Constructively Fraudulent Transfer, Reasonably Equivalent Value.

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