What is an avoidance action?
Both preference actions and fraudulent transfer actions are “avoidance” actions. The term “avoidance” is sometimes used to refer to a lawsuit asking the bankruptcy to invalidate a transfer or lien. If a transfer is avoided, the property transferred must be returned. If a lien is avoided, a creditor may lose its rights in collateral. The Bankruptcy Code and other applicable law sometimes provide several bases for avoiding transfers and liens.
