In the Q2 2026 issue of Legal League Quarterly, Jeffrey Fraser, Senior Partner over ALAW’s national bankruptcy department, examines a costly and often-overlooked exposure for mortgage creditors: the power of Chapter 7 trustees to avoid and recover mortgage payments under §§ 544, 547, 548, and 550 of the Bankruptcy Code.
The risk surfaces in a deceptively common scenario. A borrower who owns or controls a business falls into the habit of paying a personal home mortgage out of company funds. When that business later files for Chapter 7, the trustee may bring an adversary proceeding — not against the borrower, but against the mortgage creditor — seeking to claw back those payments as fraudulent or preferential transfers.
Fraser walks through the constructive-fraud framework of § 548(a)(1)(B) and the pivotal “reasonably equivalent value” inquiry, drawing on In re Duplication Management, In re Seaway International Transport, and related decisions to show why facts matter enormously. The difference between a creditor losing payments and successfully defending them often turns on whether the debtor company received a demonstrable direct or indirect benefit — and on how persuasively the alter-ego theory can be deployed. As Fraser cautions, a current and paying account is always the goal, but who is paying that account today can become an expensive problem tomorrow.
Read the full article in Legal League Quarterly (Q2 2026) →