There are several provisions of law that address transfers before a bankruptcy case - federal bankruptcy statutes, state statutes, and state common law. Transfers that violate these rules may be subject to avoidance and the parties may face other serious penalties, including their denial of a bankruptcy discharge.Solvency
Solvency relates to the ability of a person to pay debts are they mature or in the ordinary course of business. One key item looked to as to whether the transfer was fraudulent is the "solvency" of the transferor - the person who made the transfer. Solvency is often referred to as a balance sheet test - the value of a person's assets of all types are compared to the amount of his liabilities.
