One year before filing for bankruptcy Daniela gives her sister $10,000 worth of jewelry. Daniela and her sister secretly agree that the sister will return the jewelry to Daniela after her bankruptcy case is closed. During the bankruptcy case the trustee may do which of the following?
A. Have the sister give the jewelry to the bankruptcy estate because it is a preference.
B. Have the sister give the jewelry to the bankruptcy estate because it is a fraudulent transfer.
C. Impose the automatic stay upon the jewelry “freezing” those assets.
D. Nothing because the transfer was more than 90 days before bankruptcy
E. Nothing because gifts up to $10,000 to related parties are allowed without penalty
Answer: B. Have the sister give the jewelry to the bankruptcy estate because it is a fraudulent transfer.
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