On May 16, in Husky International Electronics v. Ritz, the U.S. Supreme Court decided the term “actual fraud” in Bankruptcy Code § 523(a)(2)(A) encompasses forms of fraud, like fraudulent conveyance schemes, that can be effected without a false representation by a debtor.
Husky International Electronics Inc. sold its products to Chrysalis Manufacturing Corp., and Chrysalis incurred a debt to Husky. During the same period, Daniel Lee Ritz Jr., the debtor, served as a director of Chrysalis and owned at least 30 percent of Chrysalis’ common stock. The debtor drained Chrysalis of assets it could have used to pay its debts to creditors like Husky by transferring large sums of Chrysalis’ funds to other entities the debtor controlled.
