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Bernice and Her Sister, Eda, Run Sportfemina Inc, a Company

Question 62

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Bernice and her sister, Eda, run Sportfemina Inc, a company specializing in retailing women's sporting goods and apparel.They have a number of suppliers who are creditors of the company for the inventory they provide.This includes golf clubs, weights, racquets of all types, jogging shoes, various types of clothing, and other equipment.Sportfemina runs into trouble, however, and Bernice and Eda have a fairly clear idea that the company will have to enter bankruptcy shortly.They therefore transfer $700 000 worth of inventory free of charge to a competitor store, Sportstrac, that Eda has a part interest in.They also pay off its outstanding debts to two running shoe suppliers in the hope that, after the current trouble subsides, those companies will be eager to extend inventory to Bernice and Eda again.Finally, they assign all of the corporation's accounts receivable to their parents.A month later, Sportfemina enters bankruptcy.What can the trustee do to challenge the foregoing transactions?

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