United States Code
11 U.S.C. § 550 — Liability of transferee of avoided transfer
Section 550 is the recovery step. Once a transfer has been avoided under one of the sections listed in subsection (a), this section decides who has to hand over the property — or its value, if the court so orders — for the benefit of the bankruptcy estate. The trustee may pursue the first person who received it, the person it benefited, or later recipients. Subsections (b), (c) and (f) limit that recovery, and subsection (d) allows only one satisfaction.
Avoiding a transfer and actually getting the property back are two different steps in the Bankruptcy Code, and this is the second one. If money or property left your hands before you filed — a payment to a relative, a transfer of a car, a lien granted to one creditor — the question of who the trustee can chase, and how far down the chain, is answered here. It also matters if you are on the receiving end: subsections (b), (c), (e) and (f) are the limits that protect people who took property without knowing anything was wrong.
Who can the bankruptcy trustee recover the property from?
Subsection (a) applies only after a transfer has already been avoided under one of the listed provisions — section 544, 545, 547, 548, 549, 553(b), or 724(a). It then names the possible targets: the initial transferee of the transfer, the entity for whose benefit the transfer was made, and any immediate or mediate transferee of that initial transferee. "Immediate or mediate" reaches people further down the chain, not only the first recipient, so property that has been passed along more than once is still within the section's reach. What the trustee recovers is the property that was transferred, or the value of that property if the court so orders — the substitution of money for the thing itself is the court's decision, not the trustee's alone. Whatever comes back is recovered "for the benefit of the estate," not for any single creditor. The subsection opens with "except as otherwise provided in this section," which signals that everything after it narrows this basic power.
Can someone who bought the property in good faith be sued?
Subsection (b) is the good-faith shield, and it applies to the later links in the chain — the recovery described in subsection (a)(2), not the initial transferee. The trustee may not recover from a transferee who satisfies three things together: the transferee took for value, in good faith, and without knowledge of the voidability of the avoided transfer. The subsection says "value" includes the satisfaction or securing of a present or antecedent debt, so paying off or securing an existing obligation can count as value rather than a gift. Paragraph (2) extends the same protection to any immediate or mediate good faith transferee of a protected transferee, so the shield carries forward down the chain. Note what is absent: this subsection is written for later transferees. It does not by its terms limit recovery from the initial transferee or from the entity for whose benefit the transfer was made under subsection (a)(1).
What if the payment went to an insider like a family member?
Subsection (c) addresses one specific situation: a transfer made between 90 days and one year before the bankruptcy petition was filed, avoided as a preference under section 547(b), where the transfer was made for the benefit of a creditor who was an insider at the time. In that combination, the trustee may not recover under subsection (a) from a transferee that is not an insider. The practical shape of this is a payment that runs through one party but benefits another. If the person who actually received the property was not an insider, subsection (c) directs recovery away from them for that longer look-back window. All three conditions in the subsection must be present — the timing, avoidance under section 547(b), and the insider benefit — and each of those terms is defined elsewhere in the Code rather than in this section.
Can the trustee collect the same transfer more than once?
No. Subsection (d) states plainly that the trustee is entitled to only a single satisfaction under subsection (a). This matters because subsection (a) makes several people potentially answerable for the same transfer at the same time — the initial transferee, the party the transfer benefited, and later recipients in the chain. Without this limit, one transfer could produce multiple recoveries for the estate. Subsection (d) does not say which of those parties the trustee must pursue, or in what order; it caps the total. Read together with subsection (a), the picture is a choice of defendants but one recovery: the estate is made whole for that transfer once, and further collection on the same avoided transfer is outside what this section allows.
What if I spent money fixing up the property before the trustee came after it?
Subsection (e) gives a good faith transferee a lien on the recovered property to secure the lesser of two measures: the cost to that transferee of any improvement made after the transfer, reduced by any profit the transferee realized or accrued from the property; or the increase in the property's value that resulted from the improvement. Because the lien is capped at the lesser figure, spending that did not add corresponding value is not fully secured. Paragraph (2) defines "improvement" broadly for this purpose. It includes physical additions or changes to the property, repairs, payment of any tax on the property, payment of a debt secured by a lien on the property that is superior or equal to the trustee's rights, and preservation of the property. So carrying costs and protective spending — not only renovations — fall within the definition. The subsection conditions this lien on good faith; it does not extend it to a transferee outside that description.
How long does the trustee have to bring a recovery action?
Subsection (f) sets a deadline measured from avoidance, not from the filing of the case. An action or proceeding under this section may not be commenced after the earlier of two dates: one year after the avoidance of the transfer on which recovery is sought, or the time the case is closed or dismissed. Because the statute says "the earlier of," a case that closes before the year runs cuts the period short. The clock is tied to the avoidance itself, so this section's deadline runs separately from the limitations periods that govern the avoidance actions in the sections listed in subsection (a). Nothing in this subsection addresses whether it can be extended or tolled — that question is not answered by the text of section 550, and dates and deadlines in a real case are worth raising with a bankruptcy attorney or a legal aid office.
This summary is our plain-English explanation, written to help you find the right part of the text below. The section itself is the authority — where the two differ, the text controls.
Text of 11 U.S.C. § 550
Reproduced in full from the official source, verified as of July 2026. View it at the source.
(a) Except as otherwise provided in this section, to the extent that a transfer is avoided under section 544, 545, 547, 548, 549, 553(b), or 724(a) of this title, the trustee may recover, for the benefit of the estate, the property transferred, or, if the court so orders, the value of such property, from—
(1) the initial transferee of such transfer or the entity for whose benefit such transfer was made; or
(2) any immediate or mediate transferee of such initial transferee.
(b) The trustee may not recover under section <sup>1</sup> (a)(2) of this section from—
(1) a transferee that takes for value, including satisfaction or securing of a present or antecedent debt, in good faith, and without knowledge of the voidability of the transfer avoided; or
(2) any immediate or mediate good faith transferee of such transferee.
(c) If a transfer made between 90 days and one year before the filing of the petition—
(1) is avoided under section 547(b) of this title; and
(2) was made for the benefit of a creditor that at the time of such transfer was an insider;
the trustee may not recover under subsection (a) from a transferee that is not an insider.
(d) The trustee is entitled to only a single satisfaction under subsection (a) of this section.
(e)(1) A good faith transferee from whom the trustee may recover under subsection (a) of this section has a lien on the property recovered to secure the lesser of—
(A) the cost, to such transferee, of any improvement made after the transfer, less the amount of any profit realized by or accruing to such transferee from such property; and
(B) any increase in the value of such property as a result of such improvement, of the property transferred.
(2) In this subsection, "improvement" includes—
(A) physical additions or changes to the property transferred;
(B) repairs to such property;
(C) payment of any tax on such property;
(D) payment of any debt secured by a lien on such property that is superior or equal to the rights of the trustee; and
(E) preservation of such property.
(f) An action or proceeding under this section may not be commenced after the earlier of—
(1) one year after the avoidance of the transfer on account of which recovery under this section is sought; or
(2) the time the case is closed or dismissed.
(Pub. L. 95–598, Nov. 6, 1978, 92 Stat. 2601; Pub. L. 98–353, title III, §465, July 10, 1984, 98 Stat. 379; Pub. L. 103–394, title II, §202, Oct. 22, 1994, 108 Stat. 4121.)
Notes and amendment history
Published by the official source alongside the section above. These notes record how the text has changed over time and the reasoning behind those changes. They are not the operative rule — the enacted text is the section itself.
Historical and Revision Notes
legislative statements
Section 550(a)(1) of the House amendment has been modified in order to permit recovery from an entity for whose benefit an avoided transfer is made in addition to a recovery from the initial transferee of the transfer. Section 550(c) would still apply, and the trustee is entitled only to a single satisfaction. The liability of a transferee under section 550(a) applies only "to the extent that a transfer is avoided". This means that liability is not imposed on a transferee to the extent that a transferee is protected under a provision such as section 548(c) which grants a good faith transferee for value of a transfer that is avoided only as a fraudulent transfer, a lien on the property transferred to the extent of value given.
Section 550(b) of the House amendment is modified to indicate that value includes satisfaction or securing of a present antecedent debt. This means that the trustee may not recover under subsection (a)(2) from a subsequent transferee that takes for "value", provided the subsequent transferee also takes in good faith and without knowledge of the transfer avoided.
Section 550(e) of the House amendment is derived from section 550(e) of the Senate amendment.
senate report no. 95–989
Section 550 prescribes the liability of a transferee of an avoided transfer, and enunciates the separation between the concepts of avoiding a transfer and recovering from the transferee. Subsection (a) permits the trustee to recover from the initial transferee of an avoided transfer or from any immediate or mediate transferee of the initial transferee. The words "to the extent that" in the lead in to this subsection are designed to incorporate the protection of transferees found in proposed 11 U.S.C. 549(b) and 548(c). Subsection (b) limits the liability of an immediate or mediate transferee of the initial transferee if such secondary transferee takes for value, in good faith and without knowledge of the voidability of the transfer. An immediate or mediate good faith transferee of a protected secondary transferee is also shielded from liability. This subsection is limited to the trustee's right to recover from subsequent transferees under subsection (a)(2). It does not limit the trustee's rights against the initial transferee under subsection (a)(1). The phrase "good faith" in this paragraph is intended to prevent a transferee from whom the trustee could recover from transferring the recoverable property to an innocent transferee, and receiving a retransfer from him, that is, "washing" the transaction through an innocent third party. In order for the transferee to be excepted from liability under this paragraph, he himself must be a good faith transferee. Subsection (c) is a further limitation on recovery. It specifies that the trustee is entitled to only one satisfactory, under subsection (a), even if more than one transferee is liable.
Subsection (d) protects good faith transferees, either initial or subsequent, to the extent of the lesser of the cost of any improvement the transferee makes in the transferred property and the increase in value of the property as a result of the improvement. Paragraph (2) of the subsection defines improvement to include physical additions or changes to the property, repairs, payment of taxes on the property, payment of a debt secured by a lien on the property, discharge of a lien on the property, and preservation of the property.
Subsection (e) establishes a statute of limitations on avoidance by the Trustee. The limitation is one year after the avoidance of the transfer or the time the case is closed or dismissed, whichever is earlier.
Editorial Notes
Amendments
**1994**—Subsecs. (c) to (f). Pub. L. 103–394 added subsec. (c) and redesignated former subsecs. (c) to (e) as (d) to (f), respectively.
**1984**—Subsec. (a). Pub. L. 98–353, §465(a), substituted "549, 553(b), or 724(a) of this title" for "549, or 724(a) of this title".
Subsec. (d)(1)(A). Pub. L. 98–353, §465(b)(1), inserted "or accruing to" after "by".
Subsec. (d)(1)(B). Pub. L. 98–353, §465(b)(2), substituted "the value of such property" for "value".
Subsec. (d)(2)(D). Pub. L. 98–353, §465(b)(3), substituted "payment of any debt secured by a lien on such property that is superior or equal to the rights of the trustee; and" for "payment of any debt secured by a lien on such property."
Subsec. (d)(2)(E), (F). Pub. L. 98–353, §465(b)(3), (4), struck out subpar. (E) "discharge of any lien against such property that is superior or equal to the rights of the trustee; and" and redesignated subpar. (F) as (E).
Subsec. (e)(1). Pub. L. 98–353, §465(c), substituted "or" for "and".
Statutory Notes and Related Subsidiaries
Effective Date of 1994 Amendment
Amendment by Pub. L. 103–394 effective Oct. 22, 1994, and not applicable with respect to cases commenced under this title before Oct. 22, 1994, see section 702 of Pub. L. 103–394, set out as a note under section 101 of this title.
Effective Date of 1984 Amendment
Amendment by Pub. L. 98–353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98–353, set out as a note under section 101 of this title.
<sup>1</sup> So in original. Probably should be "subsection".
Guides that rely on 11 U.S.C. § 550
Plain-language explanations on this site that cite this section.
By Antonio G. Jimenez, Esq. · Florida Bar No. 21022
Last reviewed July 27, 2026 · Sources verified July 27, 2026 · How we verify
Every figure on this page is drawn from a primary legal source and checked against our canonical legal database before publication. Bankruptcy.law is not a law firm and does not provide legal advice.
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