Viability of Guaranty “Savings Clauses” Questioned by Florida Bankruptcy Court Decision
2 December 2009
Mayer Brown Legal Update
A recent decision from the US Bankruptcy Court for the Southern District of Florida highlights the potentially broad reach of the fraudulent transfer provisions of the Bankruptcy Code. While the central holding of Committee of Unsecured Creditors of TOUSA Inc. v. Citicorp North America, Inc, is neither remarkable nor groundbreaking, at least in light of the Bankruptcy Court’s findings of fact, the court did suggest that so-called “savings clauses” — provisions commonly included in intercorporate guaranties of commercial loans to limit the amount of such guaranty claims to the extent necessary to eliminate any potential fraudulent transfer liability — are per se unenforceable.