An unscrupulous debtor will often delay his bankruptcy filing until after he pays friends, relatives and close associates what he owes them while leaving other creditors unpaid. Normally, the bankruptcy filing presumes the date of insolvency as the date of the bankruptcy filing and any payments made up to 90 days prior to the bankruptcy filing are considered preference payments or fraudulent conveyances.
However, a forensic accountant who suspects this is going on, can assist in recovering these preference payments by proving that the person or organization was insolvent prior to the bankruptcy filing. In order to prove a prior insolvency date the forensic accountant or certified fraud examiner must establish the following:
- The date that the fair market value of liabilities exceeded the fair market value of assets.
- After this date the operations of the company resulted in a loss.
- There was no additional investment in the company
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