We use cookies to improve security, personalize the user experience,
enhance our marketing activities (including cooperating with our marketing partners) and for other
business use.
Click "here" to read our Cookie Policy.
By clicking "Accept" you agree to the use of cookies. Read less
The Durrett Rule: Key Insights into Bankruptcy Law and Property Transfers
Definition & Meaning
The Durrett Rule is a legal principle in bankruptcy law that addresses property transfers. Specifically, it states that if a property is sold for less than 70 percent of its market value, that transfer can be considered invalid as a preferential transfer. This principle emerged from the case Durrett v. Washington Nat'l Ins. Co., 621 F.2d 201 (5th Cir. Tex. 1980). The rule suggests that sales at or above the 70 percent threshold are deemed to provide reasonably equivalent value, while those below this percentage may be avoided in bankruptcy proceedings.
Table of content
Legal Use & context
The Durrett Rule is primarily used in bankruptcy law, particularly in cases involving the avoidance of preferential transfers. It is relevant in situations where a debtor has sold property shortly before filing for bankruptcy, potentially disadvantaging creditors. This rule is often applied in foreclosure sales and can influence how bankruptcy courts assess the validity of property transfers. Users can manage related legal documents through resources like US Legal Forms, which provide templates for bankruptcy filings and related procedures.
Key legal elements
Real-world examples
Here are a couple of examples of abatement:
Example 1: A homeowner sells their property for $150,000, while its market value is $200,000. This sale is below the 70 percent threshold (which would be $140,000), making it potentially avoidable in bankruptcy.
Example 2: A property is sold at a foreclosure auction for $180,000, with a market value of $250,000. Since this sale is above the 70 percent threshold, it is likely to be considered valid under the Durrett Rule.
Relevant laws & statutes
The Durrett Rule is primarily derived from the case law established in Durrett v. Washington Nat'l Ins. Co. and is referenced under 11 U.S.C. § 548(a)(2)(A), which deals with fraudulent transfers in bankruptcy. Additionally, the U.S. Supreme Court case BFP v. Resolution Trust Corp., 511 U.S. 531 (1994), overruled the Durrett Rule for mortgage foreclosure sales, stating that sales conducted in a regular and noncollusive manner are presumed to represent reasonably equivalent value.
Comparison with related terms
Term
Definition
Key Difference
Preferential Transfer
A transfer made to a creditor shortly before bankruptcy that benefits them over other creditors.
The Durrett Rule specifically addresses the value threshold for property transfers.
Fraudulent Transfer
A transfer made with the intent to hinder, delay, or defraud creditors.
Fraudulent transfers focus on intent, while the Durrett Rule focuses on value.
Common misunderstandings
What to do if this term applies to you
If you believe a property transfer may be subject to the Durrett Rule, consider the following steps:
Assess the sale price against the property's market value.
Consult with a legal professional to understand your rights and options.
Explore US Legal Forms for templates related to bankruptcy filings and property transfers.
In complex situations, obtaining professional legal assistance is advisable to navigate the implications of the Durrett Rule effectively.
Find the legal form that fits your case
Browse our library of 85,000+ state-specific legal templates.