Proving or Contesting Debtor Insolvency Under the Balance Sheet Test

Analyzing Insolvency in Preference and Fraudulent Transfer Litigation

Recording of a 90-minute CLE webinar with Q&A

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Conducted on Thursday, May 10, 2012

Recorded event now available

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Course Materials

This CLE course will provide bankruptcy counsel with an examination of the issue of debtor insolvency in avoidance actions and fraudulent transfers. The panel will outline the various issues that arise in proving insolvency under the balance sheet test and evidentiary issues such as records and use of expert witnesses.

Description

In order for a trustee or debtor-in-possession (DIP) to recover in an avoidance action or fraudulent transfer, he must establish that the debtor was insolvent on the date that such transfer was made or the obligation was incurred, or became insolvent as a result of such transfer or obligation.

Of the three tests to prove insolvency, the balance sheet test is the most common. Whether the debtor’s assets should be valued on a going-concern basis or a liquidation basis—the “death bed” analysis—is often hotly contested.

The trustee or DIP may meet his burden by expert testimony, financial statements, public documents or appraisals. While a qualified expert witness, generally a forensic accountant, is often needed to prove insolvency, there may be circumstances where proof may be made without an expert witness.

Listen as our authoritative panel of bankruptcy attorneys guides you through the various issues that the trustee or DIP faces when proving insolvency under the balance sheet test, including evidence and expert witness considerations.

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Outline

  1. Insolvency as an element of the claim
    1. Presumptions
    2. Burden of proof
    3. Insolvency tests
  2. Insolvency under the balance sheet test
    1. Valuation of assets as a going concern
    2. Valuation of assets on a liquidation basis
    3. Fair valuation of assets
    4. Treatment of liabilities
  3. Evidence used to determine insolvency
    1. Records to prove insolvency
    2. Use of expert witnesses

Benefits

The panel will review these and other key questions:

  • What presumptions of insolvency are afforded the debtor in various avoidance actions?
  • What factors go into a “death bed” analysis to determine whether the debtor’s assets should be valued on a going-concern or liquidation basis?
  • Are there circumstances where insolvency can be proved without the use of expert witness testimony?

Following the speaker presentations, you'll have an opportunity to get answers to your specific questions during the interactive Q&A.

Faculty

Corey R. Weber
Corey R. Weber
Partner
Ezra Brutzkus Gubner

Mr. Weber focuses on corporate bankruptcy law and litigation, business litigation and commercial collection...  |  Read More

Harris, Christopher
Christopher Harris
Partner
Latham & Watkins

Mr. Harris is a member of the firm’s Restructuring, Insolvency & Workouts, Securities Litigation &...  |  Read More

Robert F. Reilly
Robert F. Reilly
Managing Director
Willamette Management Associates

Mr. Reilly's practice includes valuation consulting, economic analysis, and financial advisory services. He...  |  Read More

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