Title 11 — Bankruptcy

Chapter 5 — Creditors, the Debtor, and the Estate

§ 550. Liability of transferee of avoided transfer

Statutory text

Except as otherwise provided in this section, to the extent that a transfer is avoided under section 544, 545, 547, 548, 549, 553(b), or 724(a) of this title, the trustee may recover, for the benefit of the estate, the property transferred, or, if the court so orders, the value of such property, from—

the initial transferee of such transfer or the entity for whose benefit such transfer was made; or

any immediate or mediate transferee of such initial transferee.

The trustee may not recover under section 1 (a)(2) of this section from—

a transferee that takes for value, including satisfaction or securing of a present or antecedent debt, in good faith, and without knowledge of the voidability of the transfer avoided; or

any immediate or mediate good faith transferee of such transferee.

If a transfer made between 90 days and one year before the filing of the petition—

is avoided under section 547(b) of this title; and

was made for the benefit of a creditor that at the time of such transfer was an insider;

the trustee may not recover under subsection (a) from a transferee that is not an insider.

The trustee is entitled to only a single satisfaction under subsection (a) of this section.

A good faith transferee from whom the trustee may recover under subsection (a) of this section has a lien on the property recovered to secure the lesser of—

the cost, to such transferee, of any improvement made after the transfer, less the amount of any profit realized by or accruing to such transferee from such property; and

any increase in the value of such property as a result of such improvement, of the property transferred.

In this subsection, “improvement” includes—

physical additions or changes to the property transferred;

repairs to such property;

payment of any tax on such property;

payment of any debt secured by a lien on such property that is superior or equal to the rights of the trustee; and

preservation of such property.

An action or proceeding under this section may not be commenced after the earlier of—

one year after the avoidance of the transfer on account of which recovery under this section is sought; or

the time the case is closed or dismissed.

Footnotes

1 So in original. Probably should be “subsection”.

Legislative history

Reconstructed from this section’s Code source credit and amendment notes, resolved against the local Statutes at Large. Editorial notes are evidence, not the law that made the change.

1978
Pub. L. 95–598 · 92 Stat. 2549
Enacted · 11 U.S.C. § 550
Pub. L. 95–598, Nov. 6, 1978, 92 Stat. 2601
Source evidence
Code source credit
Pub. L. 95–598, Nov. 6, 1978, 92 Stat. 2601
1984
Pub. L. 98–353 § 465(a) · 98 Stat. 333
Substituted · 11 U.S.C. § 550(a)
Pub. L. 98–353, § 465(a), substituted “549, 553(b), or 724(a) of this title” for “549, or 724(a) of this title”
Source evidence
Code amendment note
Subsec. (a). Pub. L. 98–353, § 465(a), substituted “549, 553(b), or 724(a) of this title” for “549, or 724(a) of this title”.
Enacted provision · exact public law section
(a) Section 550(a) of title 11 of the United States Code is amended by striking out “549, or 724(a) of this title” and inserting in lieu thereof “549, 553(b), or 724(a) of this title”.
1984
Pub. L. 98–353 § 465(b)(1) · 98 Stat. 333
Inserted · 11 U.S.C. § 550(d)(1)(A)
Pub. L. 98–353, § 465(b)(1), inserted “or accruing to” after “by”
Source evidence
Code amendment note
Subsec. (d)(1)(A). Pub. L. 98–353, § 465(b)(1), inserted “or accruing to” after “by”.
Enacted provision · exact public law section
(1) in paragraph (1)(A), by inserting “or accruing to” after “by”;
1984
Pub. L. 98–353 § 465(b)(2) · 98 Stat. 333
Substituted · 11 U.S.C. § 550(d)(1)(B)
Pub. L. 98–353, § 465(b)(2), substituted “the value of such property” for “value”
Source evidence
Code amendment note
Subsec. (d)(1)(B). Pub. L. 98–353, § 465(b)(2), substituted “the value of such property” for “value”.
Enacted provision · exact public law section
(2) in paragraph (1)(B), by striking out “value” and inserting in lieu thereof “the value of such property”;
1984
Pub. L. 98–353 § 465(b)(3) · 98 Stat. 333
Substituted · 11 U.S.C. § 550(d)(2)(D)
Pub. L. 98–353, § 465(b)(3), substituted “payment of any debt secured by a lien on such property that is superior or equal to the rights of the trustee; and” for “payment of any debt secured by a lien on such property.”
Source evidence
Code amendment note
Subsec. (d)(2)(D). Pub. L. 98–353, § 465(b)(3), substituted “payment of any debt secured by a lien on such property that is superior or equal to the rights of the trustee; and” for “payment of any debt secured by a lien on such property.”
Enacted provision · exact public law section
(3) in paragraph (2), by striking out subparagraphs (D) and (E) and inserting in lieu thereof the following: “(D) payment of any debt secured by a lien on such property that is superior or equal to the rights of the trustee; and”, and
1984
Pub. L. 98–353 § 465(b)(3) · 98 Stat. 333
1. Struck · 11 U.S.C. § 550(d)(2)(E); 11 U.S.C. § 550(d)(2)(F)
  Pub. L. 98–353, § 465(b)(3), (4), struck out subpar. (E) “discharge of any lien against such property that is superior or equal to the rights of the trustee; and”
2. Redesignated · 11 U.S.C. § 550(d)(2)(E); 11 U.S.C. § 550(d)(2)(F)
  Pub. L. 98–353, § 465(b)(3), (4), redesignated subpar. (F) as (E)
Source evidence
Code amendment note
Subsec. (d)(2)(E), (F). Pub. L. 98–353, § 465(b)(3), (4), struck out subpar. (E) “discharge of any lien against such property that is superior or equal to the rights of the trustee; and” and redesignated subpar. (F) as (E).
Enacted provision · exact public law section
(3) in paragraph (2), by striking out subparagraphs (D) and (E) and inserting in lieu thereof the following: “(D) payment of any debt secured by a lien on such property that is superior or equal to the rights of the trustee; and”, and
1984
Pub. L. 98–353 § 465(c) · 98 Stat. 333
Substituted · 11 U.S.C. § 550(e)(1)
Pub. L. 98–353, § 465(c), substituted “or” for “and”
Source evidence
Code amendment note
Subsec. (e)(1). Pub. L. 98–353, § 465(c), substituted “or” for “and”.
Enacted provision · exact public law section
(c) Section 550(e)(1) of title 11 of the United States Code is amended by striking out “and” and inserting in lieu thereof “or”.
1994
Bankruptcy Reform Act of 1994
Pub. L. 103–394 title II § 202 · 108 Stat. 4106
1. Added · 11 U.S.C. § 550(c)(f)
  Pub. L. 103–394 added subsec. (c)
2. Redesignated · 11 U.S.C. § 550(c)(f)
  Pub. L. 103–394 redesignated former subsecs. (c) to (e) as (d) to (f), respectively
Source evidence
Code amendment note
Subsecs. (c) to (f). Pub. L. 103–394 added subsec. (c) and redesignated former subsecs. (c) to (e) as (d) to (f), respectively.
Enacted provision · exact public law section
SEC. 202. LIMITATION ON LIABILITY OF NON-INSIDER TRANSFEREE FOR AVOIDED TRANSFER. Section 550 of title 11, United States Code, is amended— (1) by redesignating subsections (c), (d), and (e) as subsections (d), (e), and (f), respectively, and (2) by inserting after subsection (b) the following: “(c) If a transfer made between 90 days and one year before the filing of the petition— “(1) is avoided under section 547(b) of this title; and “(2) was made for the benefit of a creditor that at the time of such transfer was an insider; the trustee may not recover under subsection (a) from a transferee that is not an insider.”.
Effective date note
Amendment by Pub. L. 103–394 effective Oct. 22, 1994, and not applicable with respect to cases commenced under this title before Oct. 22, 1994, see section 702 of Pub. L. 103–394, set out as a note under section 101 of this title.

9 of 10 references resolved to an enrolled provision · 1 partial

Notes

Historical and Revision Notes

legislative statements

Section 550(a)(1) of the House amendment has been modified in order to permit recovery from an entity for whose benefit an avoided transfer is made in addition to a recovery from the initial transferee of the transfer. Section 550(c) would still apply, and the trustee is entitled only to a single satisfaction. The liability of a transferee under section 550(a) applies only “to the extent that a transfer is avoided”. This means that liability is not imposed on a transferee to the extent that a transferee is protected under a provision such as section 548(c) which grants a good faith transferee for value of a transfer that is avoided only as a fraudulent transfer, a lien on the property transferred to the extent of value given.

Section 550(b) of the House amendment is modified to indicate that value includes satisfaction or securing of a present antecedent debt. This means that the trustee may not recover under subsection (a)(2) from a subsequent transferee that takes for “value”, provided the subsequent transferee also takes in good faith and without knowledge of the transfer avoided.

Section 550(e) of the House amendment is derived from section 550(e) of the Senate amendment.

senate report no. 95–989

Section 550 prescribes the liability of a transferee of an avoided transfer, and enunciates the separation between the concepts of avoiding a transfer and recovering from the transferee. Subsection (a) permits the trustee to recover from the initial transferee of an avoided transfer or from any immediate or mediate transferee of the initial transferee. The words “to the extent that” in the lead in to this subsection are designed to incorporate the protection of transferees found in proposed 11 U.S.C. 549(b) and 548(c). Subsection (b) limits the liability of an immediate or mediate transferee of the initial transferee if such secondary transferee takes for value, in good faith and without knowledge of the voidability of the transfer. An immediate or mediate good faith transferee of a protected secondary transferee is also shielded from liability. This subsection is limited to the trustee’s right to recover from subsequent transferees under subsection (a)(2). It does not limit the trustee’s rights against the initial transferee under subsection (a)(1). The phrase “good faith” in this paragraph is intended to prevent a transferee from whom the trustee could recover from transferring the recoverable property to an innocent transferee, and receiving a retransfer from him, that is, “washing” the transaction through an innocent third party. In order for the transferee to be excepted from liability under this paragraph, he himself must be a good faith transferee. Subsection (c) is a further limitation on recovery. It specifies that the trustee is entitled to only one satisfactory, under subsection (a), even if more than one transferee is liable.

Subsection (d) protects good faith transferees, either initial or subsequent, to the extent of the lesser of the cost of any improvement the transferee makes in the transferred property and the increase in value of the property as a result of the improvement. Paragraph (2) of the subsection defines improvement to include physical additions or changes to the property, repairs, payment of taxes on the property, payment of a debt secured by a lien on the property, discharge of a lien on the property, and preservation of the property.

Subsection (e) establishes a statute of limitations on avoidance by the Trustee. The limitation is one year after the avoidance of the transfer or the time the case is closed or dismissed, whichever is earlier.

Editorial Notes

Amendments1984–1994 · 2 rounds

1994

Subsecs. (c) to (f). Pub. L. 103–394 added subsec. (c) and redesignated former subsecs. (c) to (e) as (d) to (f), respectively.

1984

Subsec. (a). Pub. L. 98–353, § 465(a), substituted “549, 553(b), or 724(a) of this title” for “549, or 724(a) of this title”.

Subsec. (d)(1)(A). Pub. L. 98–353, § 465(b)(1), inserted “or accruing to” after “by”.

Subsec. (d)(1)(B). Pub. L. 98–353, § 465(b)(2), substituted “the value of such property” for “value”.

Subsec. (d)(2)(D). Pub. L. 98–353, § 465(b)(3), substituted “payment of any debt secured by a lien on such property that is superior or equal to the rights of the trustee; and” for “payment of any debt secured by a lien on such property.”

Subsec. (d)(2)(E), (F). Pub. L. 98–353, § 465(b)(3), (4), struck out subpar. (E) “discharge of any lien against such property that is superior or equal to the rights of the trustee; and” and redesignated subpar. (F) as (E).

Subsec. (e)(1). Pub. L. 98–353, § 465(c), substituted “or” for “and”.

Statutory Notes and Related Subsidiaries

Effective Date of 1994 Amendment

Amendment by Pub. L. 103–394 effective Oct. 22, 1994, and not applicable with respect to cases commenced under this title before Oct. 22, 1994, see section 702 of Pub. L. 103–394, set out as a note under section 101 of this title.

Effective Date of 1984 Amendment

Amendment by Pub. L. 98–353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98–353, set out as a note under section 101 of this title.

Credits

1978–1994 · 3 acts

1978Pub. L. 95–598, Nov. 6, 1978, 92 Stat. 2601
1984Pub. L. 98–353, title III, § 465, July 10, 1984, 98 Stat. 379
1994Pub. L. 103–394, title II, § 202, Oct. 22, 1994, 108 Stat. 4121.

Show as published

(Pub. L. 95–598, Nov. 6, 1978, 92 Stat. 2601; Pub. L. 98–353, title III, § 465, July 10, 1984, 98 Stat. 379; Pub. L. 103–394, title II, § 202, Oct. 22, 1994, 108 Stat. 4121.)