Case Explained: In re JASON ROBERT WYLIE; LEAH S. WYLIE Debtors. KATHLEEN SULLIVAN

Court: United States Court of Appeals for the Sixth Circuit Filed: 2026-08-06 The Sixth Circuit affirmed the lower courts’ ruling that a bankruptcy trustee could avoid a transfer of real property from debtor Jason Wylie to his mother, Kathleen Sullivan, under the constructive fraud provisions of 11 U.S.C. § 548(a)(1)(B)(i). The court held that Wylie did not receive “reasonably equivalent value” for the transfer because the release of mortgage debt he received was less than the value of the property conveyed, and Sullivan failed to prove that a separate $200,000 business loan or a $33,000 conversion claim were satisfied by the transaction. Applying Michigan contract law, the court reviewed de novo the interpretation of the 2014 loan agreement and found no personal guaranty by Wylie for his company’s debt. Under Michigan law, absent two distinct signature blocks or explicit language creating a personal obligation, an officer signing as “President” and “individually” does not automatically create a personal guaranty; the contract text identified only the company as the obligor. Furthermore, the court found that the 2019 “Mutual Release in Full” extinguished claims related to specific mortgages and promissory notes but did not cover the separate conversion claim or the business loan, as the release’s language was limited to those listed instruments and Sullivan’s extrinsic evidence regarding intent lacked credibility. Regarding the remedy, the court affirmed the bankruptcy court’s exercise of discretion under 11 U.S.C. § 550 to order the return of the specific property rather than its value, noting that Congress grants courts broad authority to choose between recovering the property or its value and that Sullivan failed to preserve arguments contesting this specific remedy below. As a result, the transfer remains avoided, and Kathleen Sullivan must return the paid-off real property to Wylie’s bankruptcy estate for distribution to creditors. The court declined to address Sullivan’s claim regarding the district court’s adoption of the trustee’s proposed order, finding no reversible error in that procedural matter. Do It For The Case Law is a news reporting service. Nothing in this episode constitutes legal advice.