Durrett Rule Law and Legal Definition
Durrett rule is a principle of Bankruptcy law that a transfer of property in exchange for less than 70% of the property's value should be invalidated as a preferential transfer. The standard was set in the case Durrett v. Washington Nat'l Ins. Co., 621 F.2d 201 (5th Cir. Tex. 1980). The Durrett rule implies that if the sale is for 70% or more of the market value, then it is reasonably equivalent value as a matter of law under 11 U.S.C. § 548(a)(2)(A); if, however, the sale is for less than 70% of the market value, it is not reasonably equivalent value and the transfer can be avoided. This rule has been applied most frequently to foreclosure sales. However, the U.S. Supreme Court in Bfp v. Resolution Trust Corp., 511 U.S. 531 (U.S. 1994) overruled the Durretts’s rule and held that at least for mortgage foreclosure sales, the price received at a regularly conducted, noncollusive sale represents a reasonably equivalent value of the property, and the transfer is presumed valid.
