Sink, Trustee v. Albrecht et al

UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NORTH CAROLINA
RALEIGH DIVISION
IN RE:
CASE NO.
LUCAS DANIEL RIEDER ALBRECHT,
DEBTOR
25-01097-5-PWM
CHAPTER 7
KEVIN L. SINK, TRUSTEE,
ADV. PRO. NO.
25-00135-5-PWM
PLAINTIFF,
v.
LUCAS DANIEL RIEDER ALBRECHT and
KIRSTEN PIPER MOORE,
DEFENDANTS.
MEMORANDUM OPINION ALLOWING SUMMARY JUDGMENT
IN FAVOR OF THE PLAINTIFF AND DENYING
DEFENDANTS’ CROSS-MOTION FOR SUMMARY JUDGMENT
The issue before the court is whether the deeding of real property held as joint tenants to
tenancy by the entirety on the eve of bankruptcy, rendering the equity in the property unavailable
to individual creditors, is a voidable transfer. The parties stipulated to the facts, and the matter is
before the court on cross-motions for summary judgment filed by the plaintiff, Kevin L. Sink as
chapter 7 trustee for Lucas Daniel Rieder Albrecht (the Trustee), on December 10, 2025, D.E. 14,
SO ORDERED
__________________________________________________________
SIGNED this 13 day of February, 2026.
____________________________________
Pamela W. McAfee
United States Bankruptcy Judge
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and by the defendants, Lucas Daniel Rieder Albrecht and Kirsten Piper Moore, on December 31,
2025, D.E. 17. A hearing took place on February 3, 2026, in Raleigh, North Carolina, at the
conclusion of which the court took the matter under advisement. For the reasons that follow,
summary judgment will be entered in favor of the Trustee, and the defendants’ cross-motion for
summary judgment is denied.
PROCEDURAL BACKGROUND
Lucas Daniel Rieder Albrecht filed a voluntary petition for relief under chapter 7 of the
Bankruptcy Code on March 26, 2025, and Kevin L. Sink was appointed Trustee. On July 2, 2025,
the Trustee filed the complaint in this adversary proceeding, asserting claims against the
defendants, Mr. Albrecht and his spouse Kirsten Piper Moore, to avoid a transfer of an interest in
real property pursuant to 11 U.S.C. §§ 548(a)(1)(A)-(B) and North Carolina General Statutes
§§ 39-23.4(a)(1)-(2). D.E. 1.
On December 10, 2025, the Trustee filed a stipulation of facts, D.E. 14. On the same day,
the Trustee filed a motion for summary judgment and accompanying memorandum pursuant to
Rule 56 of the Federal Rules of Civil Procedure, made applicable to this adversary proceeding by
Rule 7056 of the Federal Rules of Bankruptcy Procedure. D.E. 15, 16. The Trustee contends that
Mr. Albrecht and Ms. Moore’s retitling of property owned by them as joint tenants to a tenancy
by the entirety is an actually and constructively fraudulent transfer avoidable under both federal
and state law. The Trustee also contends that the stipulated facts demonstrate that the transfer is
avoidable as a matter of law.
On December 31, 2025, Mr. Albrecht and Ms. Moore filed a response in opposition to the
Trustee’s motion and a cross-motion for summary judgment and accompanying memorandum.
D.E. 17, 18. Mr. Albrecht and Ms. Moore agree that there is no genuine issue of material fact, but
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they contend that they are entitled to judgment as a matter of law because (1) there was no transfer,
and (2) if there was a transfer, there is no actual or constructive fraud because Mr. Albrecht
received reasonably equivalent value from Ms. Moore, a fact that (in their view) would negate
actual intent and would defeat the claim for constructive fraud.
JURISDICTION
This bankruptcy court has jurisdiction over the parties and the subject matter of this
proceeding pursuant to 28 U.S.C. § 1334. This is a statutorily core proceeding under 28 U.S.C.
§ 157(b)(1) that this court is authorized to hear and determine. The United States District Court
for the Eastern District of North Carolina has referred this case and this proceeding to this court
under 28 U.S.C. § 157(a) by its General Order of Reference entered on August 3, 1984. This
proceeding is constitutionally core, and this court may enter final orders herein. Venue is proper
pursuant to 28 U.S.C. §§ 1408 and 1409.
UNDISPUTED FACTS 1
On or around May 13, 2020, Mr. Albrecht and Ms. Moore, who at that time were
unmarried, purchased real property at 4704 Arbor Chase Drive, Raleigh, North Carolina 27616
(the Property) as “Joint Tenants w/Rights of Survivorship.” D.E. 14, ¶ 2. For nearly five years,
from May 13, 2020 to February 26, 2025, Mr. Albrecht and Ms. Moore resided in the Property as
unmarried domestic partners. Id., ¶ 4.
On the advice of counsel and in preparation for filing the petition, Mr. Albrecht and Ms.
Moore married on February 26, 2025, and, on February 27, 2025, “each separately and
independently executed a North Carolina Non-Warranty Deed as grantors in favor of themselves
as spouses” (the February Deed). Id., ¶ 3. The February Deed conveyed Mr. Albrecht’s one-half
1 The recited facts are contained in the Stipulation of Facts, D.E. 14.
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interest in the Property to himself and his new spouse, Ms. Moore, as tenants by the entirety. Id.,
¶ 5. Before the transfer, Mr. Albrecht’s one-half interest was valued at $210,0002 (one-half of the
Property’s total value of $420,000) and was subject to execution by his individual creditors, but
after the transfer, his interest became exempt from the claims of his individual creditors. Id., ¶¶ 6-7.
Mr. Albrecht received no consideration for the transfer beyond the February Deed itself. Id., ¶ 8.
Mr. Albrecht’s voluntary petition for relief under the Bankruptcy Code was filed 27 days after
execution of the February Deed. Id., ¶ 9. Mr. Albrecht was insolvent on the date of the transfer,
February 27, 2025, or became insolvent because of that transfer. Id., ¶ 10.
STANDARD FOR SUMMARY JUDGMENT
Summary judgment “is proper ‘if the pleadings, depositions, answers to interrogatories,
and admissions on file, together with the affidavits, if any, show that there is no genuine issue as
to any material fact and that the moving party is entitled to a judgment as a matter of law.’” Celotex
Corp. v. Catrett, 477 U.S. 317, 322 (1986). In evaluating a summary judgment motion, a court
“must consider whether a reasonable jury could find in favor of the non-moving party, taking all
inferences to be drawn from the underlying facts in the light most favorable to the non-movant.”
In re Apex Express Corp., 190 F.3d 624, 633 (4th Cir. 1999). The party seeking summary judgment
shoulders the initial burden of demonstrating to the court that there is no genuine issue of material
fact. Celotex, 477 U.S. at 323. Once the movant has made this threshold demonstration, the non-
moving party, to survive the motion for summary judgment, may not rest on the allegations averred
in his pleadings. Id. at 324. Rather, the non-moving party must demonstrate the existence of
2 The Schedules filed in the bankruptcy case indicate that the Property is encumbered by a mortgage
in the amount of $247,811.56, Case No. 25-01097-5-PWM, D.E. 1 at 21, resulting in a one-half equity
interest value of $86,094.22. Mr. Albrecht has an available homestead exemption in the amount of $30,000,
which would make available $56,094.22 in value to the estate should the transfer at issue be avoided. Timely
claims filed in the case total $61,463.74.
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specific, material facts that give rise to a genuine issue. Id. Under this standard, the existence of a
mere scintilla of evidence in support of the non-movant’s position is insufficient to withstand the
summary judgment motion. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986). Likewise,
conclusory allegations or denials, without more, are insufficient to preclude granting the summary
judgment motion. Id. at 248. Here, the parties agree that there are no disputed facts and that the
court may determine the outcome of the proceeding solely as a matter of law.
DISCUSSION
The Bankruptcy Code empowers a chapter 7 trustee to avoid a transfer as constructively or
actually fraudulent as defined by the Bankruptcy Code, and further empowers a trustee to avoid
transfers using substantive North Carolina law under certain circumstances. Although the language
of the Bankruptcy Code and state statutes differs, at their core the elements of the claims are the
same.
A transfer may be avoided as constructively fraudulent under § 548(a)(1)(B) where the
following five elements are established: (1) the debtor had an interest in property; (2) the debtor
transferred that interest; (3) the transfer occurred on or within two years before the debtor filed for
bankruptcy relief; (4) the debtor received less than reasonably equivalent value for the transfer;
and (5) the debtor was insolvent on the date of the transfer or became insolvent as a result of the
transfer. A transfer may be avoided as actually fraudulent under § 548(a)(1)(A) of the Bankruptcy
Code upon a showing of the following four elements: (1) the debtor had an interest in property;
(2) the debtor transferred that interest; (3) the transfer occurred on or within two years before the
debtor filed for bankruptcy relief; and (4) the debtor made the transfer with intent to hinder, delay,
or defraud any creditor. The elements of constructive and actual fraud for purposes of a voidable
transfer under North Carolina law, North Carolina General Statutes §§ 39-23.4(a)(2) and (1),
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respectively, are the same, but North Carolina provides for the avoidance of transfers made within
four years as opposed to two.
As detailed more fully below, Mr. Albrecht and Ms. Moore contend that the transaction
was not a “transfer” at all, which, if proven, would necessarily defeat the Trustee’s claims under
any of the applicable statutes. They further contend that even if it was a transfer, Mr. Albrecht
received reasonably equivalent value in exchange for the transaction, which would defeat the
federal and state claims for avoidance under a constructive fraud theory and, as argued at the
hearing, would negate any “badges of fraud” otherwise present to defeat the claims for actual fraud.
I. 	Whether the Transaction Constitutes a Transfer of an Interest
The transaction in question is the execution of a deed by Mr. Albrecht and Ms. Moore, who
held the Property as joint tenants, to themselves as tenants by the entirety. In other words, the
grantors and grantees in name are the same, and the Property is the same, but the ownership
interests changed from joint tenants to tenants by the entirety – an interest that under state law
transforms an undivided and alienable one-half interest into an undivided and inalienable 100%
interest.
Mr. Albrecht and Ms. Moore contend that a transfer did not occur under the Bankruptcy
Code or North Carolina law, maintaining that the Trustee “must prove that the retitling of joint
tenancy property as tenancy by entirety property is an instance of either (a) disposing of property
or (b) a valuable legal right appurtenant to that property.” D.E. 18 at 2. They assert that the focus
should be solely on the transferor’s rights, not the rights of a creditor or the bankruptcy estate, and
they contend that the change in Mr. Albrecht’s interest from “alienable” to “inalienable” is not a
meaningful change to Mr. Albrecht’s rights. Mr. Albrecht and Ms. Moore also contest the
Trustee’s argument that, under North Carolina law, a tenancy by the entirety is by definition
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created by transfer; instead, they maintain that a transfer is not the “exclusive” way to create a
tenancy by the entirety.
The Trustee contends that the broad definition of transfer under 11 U.S.C. § 101(54)
establishes that the transaction was a transfer of Mr. Albrecht’s interest in the Property.
Specifically, he argues that the conversion from joint tenancy to tenancy by the entirety placed Mr.
Albrecht’s interest in the Property beyond the reach of his individual creditors, representing a
transfer that changed not only Mr. Albrecht’s rights and interest in the Property, but also those of
the bankruptcy estate. The Trustee also contends that the governing North Carolina statutes
provide that a tenancy by the entirety is effectuated by transfer.
The court begins its analysis with North Carolina state law and with the Bankruptcy Code
itself. Under North Carolina law, spouses receive a vested interest in real property as tenants by
the entirety via “[a] conveyance by a grantor of real property, or any interest in real property, to
the grantor and his or her spouse.” See N.C. Gen. Stat. § 41-56(b). The statute defines conveyance
as “[a] transfer of title to real property by deed or devise or other instrument transferring title to
real property.” N.C. Gen. Stat. § 41-55(1) (emphasis added). The Bankruptcy Code defines a
transfer as
(A) the creation of a lien;
(B) the retention of title as a security interest;
(C) the foreclosure of a debtor’s equity of redemption; or
(D) each mode, direct or indirect, absolute or conditional, voluntary or involuntary,
of disposing of or parting with—
(i) property; or
(ii) an interest in property.
11 U.S.C. § 101(54).
With respect to the Bankruptcy Code, Congress intended to make this definition “‘as broad
as possible.”’ Ivey v. First Citizens Bank & Trust Co. (In re Whitley), 848 F.3d 205, 208 (4th Cir.
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2017) (quoting S. Rep. No. 95–989, at 27 (1978)). Courts disfavor narrowing the scope of this
expansively defined term. See, e.g., Smiley v First Nat’l Bank of Belleville (In re Smiley), 864 F.2d
562, 565 (7th Cir. 1989) (rejecting party’s proffered definition of transfer narrowing the term to
require assets to become “beyond the reach of the creditors or outside the jurisdiction of the
bankruptcy court.”). A transfer “encompasses every means and manner by which property can pass
from ownership and possession of another, and any transaction that reduces or extinguishes
valuable legal rights is subject to avoidance.” Terry v. Paschall (In re Paschall), 403 B.R. 366,
374 (Bankr. E.D. Va. 2009) (citations omitted); see also Pirie v. Chicago Title & Tr. Co., 182 U.S.
438, 444 (1901) (examining a section of the Bankruptcy Act of 1898 from which the current
Bankruptcy Code definition was derived). In short, a transfer may occur when there is a reduction
or extinguishment of valuable legal rights.
Mr. Albrecht maintains that his rights were not meaningfully changed. Whether Mr.
Albrecht’s property interests were altered by the transformation from joint tenancy to tenancy by
the entirety must be determined under applicable state law. See Butner v. United States, 440 U.S.
48, 54 (1979). North Carolina law differentiates these types of property ownership: while a joint
tenancy allows a tenant to freely alienate his or her property interest, a tenancy by the entirety
reduces a tenant’s right to alienate by conditioning alienation upon the consent of his or her spouse.
Contrast, N.C. Gen. Stat. §§ 41-73(b)(1)-(4) (joint tenancy allows unilateral alienation of a single
tenant’s property interest), with Moore v. Greenville Banking & Tr. Co., 178 N.C. 118, 100 S.E.
269, 272 (1919) (tenancy by the entirety requires the assent of both spouses to alienate). In sum,
the inherently restrictive nature of tenancy by the entirety under North Carolina law demonstrates
that Mr. Albrecht’s legal rights were reduced.
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Cases from bankruptcy courts outside of this jurisdiction support the conclusion that Mr.
Albrecht’s rights have been materially changed by the interspousal transfer of property interests.
For example, in In re Oliver, 44 B.R. 989 (D. Mass. 1984), a Massachusetts bankruptcy court held
that the conversion or re-titling by a chapter 7 debtor of exempt real property held in a common
law tenancy by the entirety to exempt real property held in an updated statutory version of tenancy
by the entirety was a transfer under the Bankruptcy Code because the debtor’s rights in the real
property were significantly reduced by the transfer. That court concluded that the transaction was
a transfer because the debtor “gave up his exclusive rights to possession and profits, and created a
tenancy in which he would share them equally with his wife.” Id. at 991. More recently, a
bankruptcy court in the Northern District of Illinois held that a chapter 7 debtor’s conveyance or
re-titling of non-exempt real property held in a joint tenancy to exempt real property held as a
tenancy by the entirety was a transfer under the Bankruptcy Code, considering both that the rights
of the debtor’s individual creditors were extinguished by the transfer and that the debtor’s rights
were reduced by the inability to alienate his property interest without the consent of his spouse.
See Olsen v. Paulsen (In re Paulsen), 623 B.R. 747, 754 (Bankr. N.D. Ill. 2020); see also In re
Mickens, 575 B.R. 797, 801-02 (Bankr. W.D. Mich. 2017), aff’d, Hagan v. Mickens, 589 B.R. 594
(W.D. Mich. 2018) (“[T]here is no question that the prepetition transfer changed the Debtors’
respective rights and interests in the Property. That is, to the extent property can be described as a
‘bundle of sticks’ comprised of various individual rights, the joint tenancy bundle held by each
Debtor prior to the transfer was different than the tenancy by the entirety bundle that existed after
the transfer.”) (citations omitted).
The Fourth Circuit has implicitly determined that a transaction similar to the one now
before this court was a “transfer” by upholding a denial of the debtor’s discharge under § 727(a)(2),
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which applies to a “transfer” with the intent to hinder, delay or defraud a creditor or the estate, in
a case in which a chapter 7 debtor re-titled non-exempt real property held in fee simple to exempt
real property held as a tenancy by the entirety. See Ford v. Poston (In re Ford), 773 F.2d 52, 54-
55 (4th Cir. 1985). More specifically, the argument that re-deeding from joint tenancy to tenancy
by the entirety is not a “transfer” was rejected in Fink v. Arregui (In re Arregui), No. 22-04027-btf,
2023 WL 6205616, at *3, *8-11 (Bankr. W.D. Mo. Sept. 22, 2023) (“‘A party . . . need not
surrender ownership in an asset in order to effectuate a transfer.’ . . . The effect of the transaction
determines its characterization as a transfer, ‘not the circuity of the arrangement.’”) (quoting Kaler
v. Craig (In re Craig), 144 F.3d 587, 591 (8th Cir. 1998)).
In addition, the court has no basis on which to accept the narrow view urged by Mr.
Albrecht and Ms. Moore in which their singular focus is on a change to the transferor’s rights. A
reduction of the legal rights of the transferor’s individual creditors is also relevant. The court agrees
with the Paulsen court, which considered both the change in the debtor’s rights and the
extinguishment of the rights of the debtor’s individual creditors when their claims could no longer
be satisfied from re-titled real property. See Paulsen, 623 B.R. at 754. As that court explained, a
transfer “may include the reconveyance by spouses of property held in joint tenancy to tenancy by
the entirety . . . ‘because prior to the conveyance by the Debtor, his fractional interests could have
been subjected to satisfy the claims of the [creditors], and they could not reach [those] interests
after the conveyance because they had no enforceable claim against . . . the Debtor’s wife.’” Id.
(quoting In re Miller, 188 B.R. 302, 305 (Bankr. M.D. Fla. 1995)). Considering the impact on
creditors and the estate is, as the Trustee noted, consistent with the overall purpose of the avoidance
powers contained in chapter 5 of the Bankruptcy Code, which is to augment the estate through
asset recovery for distribution to creditors according to the priorities of the Bankruptcy Code.
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This survey of authority demonstrates that, contrary to the contentions of Mr. Albrecht and
Ms. Moore, none of the interspousal transfer cases limit a court’s inquiry to whether the rights of
the transferor are reduced (as opposed to the rights of creditors). Nor do these cases support the
contention that Mr. Albrecht’s interests were not reduced by the change in tenancy. Valuable legal
rights of the transferor, Mr. Albrecht, were reduced due to the restrictive nature of entirety
ownership. Further, Mr. Albrecht and Ms. Moore acknowledge that when the Property was re-
titled to tenancy by the entirety, it became exempt from the claims of Mr. Albrecht’s individual
creditors. Valuable legal rights of those creditors were drastically reduced, if not completely
extinguished, by the execution of the February Deed. Both of these changes in legal rights support
the conclusion that the transaction was a “transfer.”
Mr. Albrecht and Ms. Moore concede that they presented no authority that supports their
argument in the context of a transaction re-deeding property from joint tenants to tenants by the
entirety. They do, however, rely on the Fourth Circuit’s opinion in Whitley, in which a chapter 7
trustee sought to recover, from the depository bank as transferee, proceeds deposited by the
chapter 7 debtor into his personal checking account. 848 F.3d at 206-07. The Whitley court held
that a deposit into a personal checking account did not constitute a transfer under the Bankruptcy
Code because “the debtor is still free to access those funds at will,” and “the requisite disposing of
or parting with property has not occurred.” Id. at 210 (cleaned up). Mr. Albrecht and Ms. Moore
contend that Whitley is analogous because Mr. Albrecht’s bankruptcy estate was not diminished
by the execution of the February Deed, and Mr. Albrecht could still freely access the Property
before and after the conveyance. Therefore, they maintain, a re-titling from joint tenancy to
tenancy by the entirety between the same parties does not constitute a transfer under the
Bankruptcy Code.
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The court finds Mr. Albrecht’s and Ms. Moore’s reliance on Whitley inapposite and
unpersuasive, particularly in light of more directly applicable law. The Whitley court itself
provided that the “holding is limited to the narrow circumstances presented here: when a debtor
deposits or receives a wire transfer of funds into his own unrestricted checking account in the
regular course of business, he has not transferred those funds to the bank that operates the account.”
Id. (emphasis added). Further, Whitley is inapplicable on its facts. Although Mr. Albrecht could
still freely access the Property after the transfer, the bankruptcy estate was diminished. In contrast,
the deposited funds in Whitley remained property of the bankruptcy estate and were never placed
outside creditors’ reach. See id. In other words, the funds were not transferred from nonexempt
status to an exempt bank account, but simply deposited place into an unrestricted account.
The interests of both Mr. Albrecht and his creditors were changed through the execution
of the February Deed. Based on the weight of authority, the applicable statutes, and the stipulated
facts, the court concludes as a matter of law that the February Deed was a transfer under § 101(54)
of the Bankruptcy Code and as contemplated by § 548 of the Bankruptcy Code and North Carolina
General Statutes § 39-23.4(a).
II. 	Constructive Fraud under 11 U.S.C. § 548(a)(1)(B) and North Carolina General
Statutes § 39-23.4(a)(2)
As set forth above, a transfer may be avoided as constructively fraudulent under
§ 548(a)(1)(B) when the following five elements are established: (1) the debtor had an interest in
property; (2) the debtor transferred that interest; (3) the transfer occurred on or within two years
before the debtor filed for bankruptcy relief; (4) the debtor received less than reasonably equivalent
value for the transfer; and (5) the debtor was insolvent on the date of the transfer or became
insolvent as a result of the transfer. The North Carolina voidable transfer statute is substantively
identical but extends the look-back period to four years. See N.C. Gen. Stat. § 39-23.4(a)(2).
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Because the court has concluded that the transaction in question constituted a “transfer,”
the only element in dispute is whether Mr. Albrecht received reasonably equivalent value for the
transfer. Reasonably equivalent value is “a question of fact as to which the court is to be given
considerable latitude to make a determination by considering all the facts and circumstances
surrounding the transaction in question.” Whitaker v. Mortgage Miracles, Inc. (In re Summit Place,
LLC), 298 B.R. 62, 73 (Bankr. W.D.N.C. 2002) (citing Breeden v. Bennett (In re Bennett Funding
Group, Inc.), 220 B.R. 743, 769 (Bankr. N.D.N.Y. 1997)). According to the Trustee, reasonably
equivalent value must be analyzed with a focus on the net effect of the transfer on Mr. Albrecht’s
bankruptcy estate, rather than a focus on what assets Mr. Albrecht retained and could enjoy. The
Trustee contends that the transfer depleted the bankruptcy estate of $210,000 in value (excluding
encumbrances and allowable exemptions) that was, prior to the transfer, available for distribution
to Mr. Albrecht’s individual creditors, with no value received in its place.
Mr. Albrecht and Ms. Moore contend that Mr. Albrecht received reasonably equivalent
value for the transfer because “whatever was transferred or forfeited by the Debtor to his wife was
also transferred or forfeited by his wife to the Debtor. What was given was also received. There is
no more equivalent value than that.” D.E. 18 at 5. Mr. Albrecht and Ms. Moore cited no authority
for this proposition, but this court, in its own research, did find one court that adopted their
argument, albeit applying Eighth Circuit law. In Arregui, discussed earlier, the bankruptcy court
for the Western District of Missouri concluded that “viewing reasonably equivalent value from the
creditors’ perspectives under these circumstances would severely limit a debtor’s right to engage
in good faith exemption planning—a right the Eighth Circuit has repeatedly upheld.” 2023 WL
6205616, at *12 (citation omitted); but see Hagan v. Mickens (In re Mickens), 589 B.R. 594, 600
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(W.D. Mich. 2018) (rejecting the argument that reasonably equivalent value was received because
Michigan law applied the “perspective of creditors” test in constructive fraud cases).
Arregui and Mickens addressed this argument in the identical context of a transfer from
joint tenancy to tenancy by the entirety. Arregui involved two long-married debtors who, acting
upon advice of counsel, re-deeded their property three days before filing for bankruptcy. 2023 WL
6205616, at *1. The court held that the debtors “transferred title to their $230,700 residence as
joint tenants and received title to their $230,700 residence as tenants by the entirety,” and that
“[b]ecause these values are substantially comparable in worth, the fair market value of the property
the [debtors] received was reasonably equivalent to the fair market value of the property the
[debtors] transferred.” Id. at *13. The court applied a debtor-focused approach to the federal and
state voidable transfer statutes based on its interpretation of the language of the statutes, noting
that “[b]ecause both statutes focus on the value the debtor received rather than the value that
became available to unsecured creditors as a result of the transfer, the relevant language does not
contemplate analysis from creditors’ perspectives. The court must follow the clear statutory
language and analyze whether the value the debtor received was at least reasonably equivalent to
the value transferred.” See id. at *12.
While the court can understand the Arregui court’s perspective, an alternative view of the
language “if the debtor . . . received a less than reasonably equivalent value” focuses not on what
value the debtor, as opposed to his creditors or the estate, received, but rather on whether it was
the debtor, as opposed to a third party, who received the value given by the transferee. For example,
a debtor might pay professional fees to an attorney for services provided to a third party. There,
the attorney-transferee gave value for those fees, but that value was not received by the debtor.
This is also the distinction relied upon by trustees seeking to recover tuition payments made by
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parents to a private school for their children – the school gave value, but not to the debtors. Further,
the Arregui court purposely applied a debtor-focused approach over a creditor-focused approach
because its binding appellate court, the Eighth Circuit, has repeatedly upheld a debtor’s right to
broadly engage in good faith exemption planning.3 See id. Even so, and despite finding reasonably
equivalent value – which defeated a claim for constructive fraud – the Arregui court still avoided
the transfer on the basis of actual fraud under both federal and state law. See id. at *5-9 (finding
fraudulent intent based on several badges of fraud).
Similarly, Mickens involved two long-married debtors who, acting upon advice of counsel,
transferred real property from joint tenancy to tenants by the entirety three days before filing a
petition for bankruptcy relief. 575 B.R. at 799. The bankruptcy court, applying Michigan law,
applied the creditor-focused approach and held that “insolvent debtors may not create an entireties
estate at the expense of their creditors.” See id. at 810. The Mickens court concluded that
“‘Michigan fraudulent conveyance law is clear that the reasonable equivalen[ce] of value received
in exchange for a transfer is to be viewed from the standpoint of creditors.”’ Id. at 805. Affirming,
the district court reasoned that “‘[v]alue’ is to be determined in light of the purpose of the Act to
protect a debtor’s estate from being depleted to the prejudice of the debtor’s unsecured creditors.
Consideration having no utility from a creditor’s viewpoint does not satisfy the statutory
definition.” Hagan v. Mickens, 589 B.R. at 600 (citing Uniform Fraudulent Transfer Act § 3,
cmt. 2.).
3 Even the Eighth Circuit, however, has recognized that prebankruptcy planning is not unlimited.
In Norwest Bank Neb., N.A. v. Tveten, the court upheld the denial of the debtor’s discharge for transferring
non-exempt assets to an exempt trust, distinguishing between the conversion of non-exempt assets into
dollar-limited exempt assets (such as a statutory homestead) and the transference of non-exempt assets into
unlimited exempt assets (such as the trust in question). 848 F.2d 871, 876-77 (8th Cir. 1988). Here, Mr.
Albrecht remains entitled to claim the dollar-limited statutory homestead exemption even if the transfer is
avoided.
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This court is bound by precedent from the Fourth Circuit. And while the Fourth Circuit
has, like the Eighth Circuit, held that transforming nonexempt to exempt property on its own is
not fraudulent, see Ford, 773 F.2d at 54, this circuit, unlike the Eighth Circuit,4 expressly measures
value received from the perspective of creditors, not the transferor. In the Fourth Circuit,
[t]he proper focus is on the net effect of the transfers on the debtor’s estate, the
funds available to the unsecured creditors. As long as the unsecured creditors are
no worse off because the debtor, and consequently the estate, has received an
amount reasonably equivalent to what it paid, no fraudulent transfer has occurred.
In re Jeffrey Bigelow Design Grp., Inc., 956 F.2d 479, 484 (4th Cir. 1992); see also In re N. Merch.,
Inc., 371 F.3d 1056, 1059 (9th Cir. 2004) (agreeing with the Fourth Circuit regarding the proper
focus of fraudulent transfer claims). This instruction distinguishes the Arregui court’s basis for
applying the debtor-focused approach. Both Arregui and Mickens are appropriately predicated
upon the controlling analysis in their jurisdictions. And, while the Eighth Circuit’s expressed
policy may favor the debtor-focused approach, the Fourth Circuit, like the Mickens court, has
expressly applied the creditor-focused approach.
In this case, applying the creditor-focused approach of Jeffrey Bigelow, the undisputed
facts indicate that Mr. Albrecht’s unsecured creditors, and consequently his bankruptcy estate,
were in a worse position after the Property was transferred to tenancy by the entirety. Prior to the
transfer, Mr. Albrecht’s unsecured creditors could have executed on equity in the Property; in
contrast, after the transfer, they could not touch this valuable real property interest due to its
newfound status as a tenancy by the entirety. Because Mr. Albrecht’s unsecured creditors and
estate are negatively impacted by the transfer, he did not receive reasonably equivalent value for
executing the February Deed.
4 According to Arregui, “the Eighth Circuit does not appear to have considered whether pre-
bankruptcy exemption planning transfers might qualify as constructively fraudulent transfers.” 2023 WL
6205616, *12.
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Because the court concludes that Mr. Albrecht did not receive reasonably equivalent value
for the transfer, and the other elements of a constructively fraudulent transfer are not disputed, the
court concludes as a matter of law that the Trustee has established that the transfer is avoidable as
constructively fraudulent pursuant to § 548(a)(1)(B) and N.C. Gen. Stat. § 39-23.4(a)(2), and
summary judgment will be entered in favor of the Trustee.
III. 	Actual Fraud under 11 U.S.C. § 548(a)(1)(A) and North Carolina General Statutes
§ 39-23.4(a)(1).
A transfer may be avoided as actually fraudulent under § 548(a)(1)(A) where the following
four elements are established: (1) the debtor had an interest in property; (2) the debtor transferred
that interest; (3) the transfer occurred on or within two years before the debtor filed for bankruptcy
relief; and (4) the debtor made the transfer with intent to hinder, delay, or defraud any creditor.
The North Carolina voidable transfer statute for actual fraud is practically identical, except, as with
constructive fraud, the look-back period is four years instead of two. See N.C. Gen. Stat.
§ 39-23.4(a)(1). Based on the stipulated facts, the only element in dispute is the debtor’s intent
behind the transfer.
Determining the actual intent of a debtor may be difficult “[b]ecause a debtor is not likely
to testify that he had the requisite intent to defraud creditors;” thus, intent may be inferred from
extrinsic evidence by evaluating whether several badges of fraud are present. Bakst v. Clarkston
(In re Clarkston), 387 B.R. 882, 887 (Bankr. S.D. Fla. 2008) (citations omitted). The North
Carolina statute provides a non-exhaustive list of badges of fraud to be considered in determining
intent, N.C. Gen. Stat. § 39-23.4(b), which is equally applied in the bankruptcy context under
§ 548(a)(1)(A). “[A] court should evaluate the entirety of the circumstances surrounding the
transaction at issue and ‘may appropriately take into account all indicia [negating] as well as those
suggesting fraud.’” Schofield-Johnson, LLC v. United States (In re Schofield-Johnson, LLC), 462
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B.R. 539, 543 (Bankr. M.D.N.C. 2011) (quoting N.C. Gen. Stat. § 39-23.4(b) cmt. 6). And while
“a determination concerning fraudulent intent depends largely upon an assessment of the
credibility and demeanor of the debtor,” Mercantile Peninsula Bank v. French (In re French), 499
F.3d 345, 353 (4th Cir. 2007) (quoting Williamson v. Fireman’s Fund Ins. Co., 828 F.2d 249, 252
(4th Cir. 1987)), the parties here submitted stipulated facts and did not contend that intent could
and should only be determined at trial.
The North Carolina statute lists thirteen5 of the “most common factors used in determining
whether a transfer was made with the actual intent.” Sparkman v. Coley (In re Coley), 608 B.R.
625, 635 (Bankr. E.D.N.C. 2019). The presence of a single badge of fraud will not establish
fraudulent intent. Id.; see also Paulsen, 623 B.R. at 758 (noting no particular badge is necessary,
nor is any combination of badges necessarily sufficient). However, “the confluence of several can
constitute conclusive evidence of an actual intent to defraud, absent significantly clear evidence of
a legitimate supervening purpose.” Summit Place, 298 B.R. at 70 (citing In re McLaren, 236 B.R.
882, 899 (Bankr. D.N.D. 1999)). The presence of several badges of fraud establishes a presumption
of fraudulent intent. Coley, 608 B.R. at 636. The burden then shifts to the defendant to rebut the
presumption by showing a legitimate intervening purpose for the transfer. Id. The same is true
5 The thirteen badges of fraud enumerated in the statute are: “(1) The transfer or obligation was to
an insider; (2) The debtor retained possession or control of the property transferred after the transfer; (3)
The transfer or obligation was disclosed or concealed; (4) Before the transfer was made or obligation was
incurred, the debtor had been sued or threatened with suit; (5) The transfer was of substantially all the
debtor’s assets; (6) The debtor absconded; (7) The debtor removed or concealed assets; (8) The value of
the consideration received by the debtor was reasonably equivalent to the value of the asset transferred or
the amount of the obligation incurred; (9) The debtor was insolvent or became insolvent shortly after the
transfer was made or the obligation was incurred; (10) The transfer occurred shortly before or shortly after
a substantial debt was incurred; (11) The debtor transferred the essential assets of the business to a lienor
that transferred the assets to an insider of the debtor; (12) The debtor made the transfer or incurred the
obligation without receiving a reasonably equivalent value in exchange for the transfer or obligation, and
the debtor reasonably should have believed that the debtor would incur debts beyond the debtor's ability to
pay as they became due; and (13) The debtor transferred the assets in the course of legitimate estate or tax
planning.” N.C. Gen. Stat. §§ 39-23.4(b)(1)-(13).
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under North Carolina law: once the plaintiff establishes that several badges of fraud exist, a
presumption of fraudulent intent arises, and it is then “incumbent on the party benefited by the
alleged fraud to show the bona fides of the transaction.” Anhui Omi Vinyl Co. v. USA Opel
Flooring, Inc., 295 N.C. App. 1, 10, 905 S.E.2d 339, 345 (2024), rev. denied, 912 S.E.2d 827
(N.C. 2025) (citing Brown v. Mitchell, 102 N.C. 347, 370, 9 S.E. 702, 703-04 (1889)).
The Trustee contends the transfer effectuated by the February Deed was made with actual
intent to hinder, delay, or defraud Mr. Albrecht’s individual creditors. He maintains that this intent
is demonstrated by the timing of both the decision to marry and the transfer itself, on the eve of
bankruptcy, while they lived as unmarried domestic partners for five years. Other badges of fraud
include that the transfer was to an insider, the debtor retained possession and control of the
Property, the transfer was of substantially all of the debtor’s assets (as evident from the filed
Schedules in the case), the debtor was insolvent, and the debtor did not receive reasonably
equivalent value for the transfer.
Mr. Albrecht and Ms. Moore contend that an actual fraud analysis depends “on the
subjective mental state” of the defendants as well as “findings on matters of disclosure, honesty,
and basic morality.” D.E. 18 at 4. However, notwithstanding their opposition to the Trustee’s
motion for summary judgment, they did not submit any stipulated facts that would reflect their
mental state other than that they relied on the advice of counsel; nor did they submit an affidavit
or otherwise provide the court with any explanation beyond that the transfer was made on advice
of counsel in the course of bankruptcy planning. They also note that the transfer was not concealed,
and, as detailed above, they maintain that Mr. Albrecht received equivalent value for the transfer.
Mr. Albrecht and Ms. Moore also contend that the receipt of reasonably equivalent value
outweighs the presence of any other badge of fraud.
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The conversion of non-exempt property to exempt property on the eve of bankruptcy on
its own does not necessarily demonstrate fraudulent intent, even if the conversion was performed
to move assets beyond the reach of creditors. See Ford, 773 F.2d at 54; see also First Texas Sav.
Ass’n, Inc. v. Reed (In re Reed), 700 F.2d 986, 991 (5th Cir. 1983); Crampton v. Koehler (In re
Koehler), No. 11-00999-8-JRL, 2012 WL 719744, at *3 (Bankr. E.D.N.C. Mar. 5, 2012) (“As to
the timing of the conversion, Ford makes clear that the fact that the conversion took place on the
eve of the bankruptcy filing does not necessarily raise this transaction to fraudulent per se.”). Mr.
Albrecht and Ms. Moore maintain that Ford supports robust exemption planning, including the
type of transfer made here, and further that this proposition aligns with Congressional intent that
a debtor should be allowed to fully use applicable exemptions. Ford, 773 F.2d at 54; see also H.R.
Rep. No. 595, 95th Cong., 1st Sess. 361 (1977), reprinted in 1978 U.S. Code Cong. & Ad. News
5963, 6317; S. Rep. No. 989, 95th Cong., 2d Session 76, reprinted in *55 1978 U.S. Code Cong.
& Ad. News 5787, 5862 (“As under current law, the debtor will be permitted to convert nonexempt
property into exempt property before filing a bankruptcy petition. The practice is not fraudulent as
to creditors, and permits the debtor to make full use of the exemptions to which he is entitled under
the law.”).
However, permissible exemption planning is not without its limits. For example, the North
Carolina legislature prohibits the conversion of nonexempt assets into certain exempt assets within
90 days of filing bankruptcy through its “recent purchases” exception to certain personal property
exemptions. See N.C. Gen. Stat. § 1C-1601(d).6 In addition, and as noted above, courts have also
6 That section provides: “Recent purchases. - The exemptions provided in subdivisions (2), (3), (4),
and (5) of subsection (a) of this section are inapplicable with respect to tangible personal property purchased
by the debtor less than 90 days preceding the initiation of judgment collection proceedings or the filing of
a petition for bankruptcy, unless the purchase of the property is directly traceable to the liquidation or
conversion of property that may be exempt and no additional property was transferred into or used to
acquire the replacement property.” N.C. Gen. Stat. § 1C-1601(d).
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distinguished between converting non-exempt assets into dollar-limited exempt assets, and
between transferring non-exempt assets into unlimited exempt assets, see, e.g., Norwest Bank Neb.,
N.A. v. Tveten, 848 F.2d 871, 876-77 (8th Cir. 1988), with the resulting policy implication being
that taking advantage of some exemption planning is permissible, but not if it results in changing
the status of all or nearly all of the debtor’s assets from non-exempt to exempt.
Further, even the Ford case, on which the debtors rely, establishes that extrinsic evidence
of fraud can (and did, in that case) support a finding of intent. See Ford, 773 F.2d at 54. In Ford,
the court denied the debtor’s discharge where the debtor transferred real property to tenancy by
the entirety one day after entry of a judgment against him and one year prior to filing for
bankruptcy relief. Significantly, the timing of the transfer constituted the entirety of the extrinsic
evidence of fraud. See id. at 55. Against this backdrop, the Fourth Circuit crafted the following
rule:7 “if the transfer of property occurs within one year of the bankruptcy filing and there is
evidence to indicate a fraudulent purpose aside from the mere conversion of non-exempt property,”
the transfer was made with intent to hinder, delay or defraud.8 See id. The Ford court did not
explain further what might constitute “extrinsic evidence” in this context. However, citing Ford,
the Arregui court did provide examples of extrinsic evidence, including that the transferor (1) had
been sued or threatened with suit prior to the transfer, (2) radically departed from a previous
7 Although Ford articulates that a showing of suspicious timing and extrinsic evidence are required,
the court focused almost exclusively on timing concerns and did not identify any other extrinsic evidence.
See Ford, 773 F.2d at 53, 55.
8 In Ford, the trustee sought a denial of the debtor’s discharge under § 727(a)(2) for transfer of
property within one year before filing the petition “with intent to hinder, delay, or defraud a creditor.” The
claims in this case and in Ford address two remedies for the same conduct: the avoidance action seeks
recovery of the transferred asset, while the discharge action punishes the debtor for fraudulent conduct. The
underlying analysis is the same: a determination of whether the debtor made a transfer with the intent to
hinder, delay, or defraud a creditor. Therefore, unlike what counsel for Mr. Albrecht and Ms. Moore
maintained during the summary judgment hearing, the entirety of Ford is very much analogous and
applicable to the issue, and not just the general statement approving of some exemptions planning on which
they rely.
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lifestyle, (3) materially misled or deceived creditors about the debtor’s position, (4) conveyed the
property for less than fair consideration, (5) continued retention, benefit, or use of property after
the transfer, (6) transferred property after a creditor obtained a judgment, and (7) made false
statements or failed to disclose the transfer on his or her bankruptcy schedules. Arregui, 2023 WL
6205616, at *9 (citations omitted).
In accordance with Ford, Mr. Albrecht’s transfer from non-exempt real property to exempt
real property is not fraudulent solely because it was made on the eve of bankruptcy. However,
there is extrinsic evidence to support a finding of intent to hinder, delay or defraud his creditors
based on the presence of several badges of fraud. As noted by the Trustee, the transfer was to an
insider, Mr. Albrecht retained possession or control of the transferred property after the transfer,
the transfer was of substantially all of Mr. Albrecht’s assets, Mr. Albrecht did not receive
reasonably equivalent value in exchange for the transfer (as found by the court above), and Mr.
Albrecht was insolvent or became insolvent shortly after the transfer was made.
Here, the presence of these several badges of fraud creates a presumption of fraudulent
intent.9 See Coley, 608 B.R. at 635. The burden shifted to Mr. Albrecht and Ms. Moore to rebut
this presumption by showing a legitimate intervening purpose for the transfer. However, the
defendants did not offer an intervening purpose for the transfer and instead focused on the absence
of two badges of fraud (concealment and lack of reasonably equivalent value) and on the
suggestion that acting on advice of counsel buffers them from a finding of actual intent. Disclosure
9 Had the court been persuaded that reasonably equivalent value was received, the presumption of
actual intent to hinder, delay or defraud still has been established due to the presence of the four other
badges of fraud. See also Arregui, 2023 WL 6205616 at *5-10 (finding reasonably equivalent value but still
determining the statutory factors supported the inference that the debtors acted with fraudulent intent,
including that they retained possession or control of the property after the transfer, that they did not disclose
the transfer on their statement of financial affairs despite making the transfer only three days before the
petition date, and that the transfer deprived the estate of substantially all of the debtors’ nonexempt assets,
in addition to the debtors’ insolvency under the Bankruptcy Code.).
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is not just commendable, it is expected, and it does not negate the presence of other badges of
fraud. Similarly, relying on the advice of one’s attorney does not somehow cleanse a transfer that
is made with actual intent to hinder creditors.10 Neither a lack of concealment nor reliance on
counsel’s advice establish a legitimate intervening purpose for the transfer. Additionally, as
explained in the discussion of constructive fraud, the contention that Mr. Albrecht received
reasonably equivalent value is unsupported by any precedent originating in the Fourth Circuit. In
short, Mr. Albrecht and Ms. Moore did not rebut the presumption of actual intent to hinder, delay
or defraud by providing a legitimate intervening purpose for the transfer.
Because the court concludes that the badges of fraud demonstrate actual intent to hinder,
delay or defraud creditors, and because the other elements of § 548(a)(1)(A) and North Carolina
General Statutes § 39-23.4(a)(1) are undisputed, the court finds that the Trustee is entitled to
judgment as a matter of law on the claims under § 548(a)(1)(A) and North Carolina General
Statutes § 39-23.4(a)(1).
CONCLUSION
Based on the foregoing conclusions of law, the Trustee’s motion for summary judgment is
allowed on all the federal and state transfer avoidance claims, and summary judgment will be
entered in favor of the Trustee. Mr. Albrecht’s and Ms. Moore’s cross-motion for summary
judgment is denied on all claims.
A separate judgment will be entered.
END OF DOCUMENT
10 Presumably the defendants were also properly advised by counsel that the legal arguments to be
advanced in support of the transfer, even if made by counsel in good faith, might be rejected by the court
and that the transfer would be subject to avoidance.
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