New York Federal Court Holds That Tax Sale Foreclosure May Constitute a Fraudulent Conveyance

The United States District Court for the Northern District of New York held that property acquired via a tax foreclosure judgment can be subject to attack as a fraudulent conveyance under 11 U.S.C. § 548.  See Clinton Cnty. Treasurer v. Wolinsky, 511 B.R. 34 (N.D.N.Y. 2014).  In the case, the Court addressed the United States Supreme Court’s ruling in BFP v. Resolution Trust Corp., in which the Supreme Court held that mortgage sale foreclosures may not constitute such conveyances, but which explicitly left open whether the ruling applied in tax sale foreclosures.  The Court then held that there is “simply no indication that Congress intended to carve out an exception” for tax sale foreclosures.  The decision is consistent with recent federal court decisions in the United States Bankruptcy Court for the District of New Jersey, however, it comes to the opposite conclusion from that of the United States District Court for the District of New Jersey, a discussion of which can be found on a previous blog post, click here.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com.