Solvency expert
Expert class library · Bankruptcy and valuation · Either side
Determines whether a debtor was insolvent, left with unreasonably small capital, or unable to pay its debts as they came due at the time of a challenged transfer, usually by reconstructing a fair value balance sheet as of that date. Solvency is often the decisive element in fraudulent transfer and preference litigation, so courts scrutinize both the valuation premise chosen and whether the expert gathered enough data to apply it.
What this expert is retained to answer
- Did the fair value of the debtor's debts exceed the fair value of its assets on the date of each challenged transfer?
- Should assets be valued on a going concern or a liquidation basis at that date?
- Was the debtor left with unreasonably small capital for the business it was engaged in?
- Could the debtor pay its debts as they matured, based on projected cash flows available at the time?
- Which assets, such as exempt property, must be excluded from the solvency calculation?
Methods
- Balance sheet test
- Cash flow test
- Capital adequacy test
- Retrospective valuation
How the testimony is attacked
- Wrong valuation premise. Defendants argue the expert used liquidation values when the debtor was a going concern, or the reverse. In Newman v. Associated Bank (In re World Marketing Chicago) the court held the dispute over using liquidation values did not make the report inadmissible and left it as a question of fact.
- Insufficient facts and data. Challengers argue that a generally accepted balance sheet method was applied without adequate asset and liability information. In Weinman v. Crowley (In re Blair) the court accepted the fair value balance sheet method as reliable but excluded the trustee's expert for failing to show sufficient facts and data supporting its application.
- Unsupported company-specific risk premium. Defendants argue that a large company-specific risk premium, or double counting of risks such as environmental liabilities, pushes a discounted cash flow valuation toward insolvency. In Buchwald v. Renco Group the court treated these points as a standard battle of the experts for the jury and refused to disturb the verdict.
- Rejecting the market approach without reason. Opponents fault experts who discard guideline company or transaction methods. The Buchwald court held that the expert's decision not to apply the market approach did not undermine his income approach analysis and was properly tested through cross-examination and the opposing expert.
- Lack of solvency-specific qualifications. Opponents question accountants whose experience is in tax or general accounting rather than valuation. The Blair court described the expert's qualifications to give a solvency opinion as rather weak because he had no specialized training or experience in solvency analysis.
- Legal standard not tied to the governing statute. Defendants point out when the expert applies the Bankruptcy Code definition to claims governed by state fraudulent transfer law. The Blair court noted the expert never explained his choice, although the Colorado and Bankruptcy Code definitions turned out to be nearly identical.
What the public record shows
A deliberately narrow CourtListener search, insolven* AND "balance sheet test" AND "fraudulent transfer" AND (Daubert OR "Rule 702"), returned 5 opinions filed since 2015, as of October 2, 2026; broader searches return more. Three that show how courts handle this class of testimony:
| Outcome | Case | Court | Why |
|---|---|---|---|
| Excluded | Weinman v. Crowley (In re Blair)588 B.R. 605 | Bankr. D. Colo. 2018 | The court excluded the trustee's solvency expert because, although the fair value balance sheet method was reliable, the trustee did not carry his burden to show the expert, whose solvency qualifications were weak, used sufficient facts and data to apply it. |
| Admitted | Newman v. Associated Bank, National Ass'n (In re World Marketing Chicago, LLC)574 B.R. 670 | Bankr. N.D. Ill. 2017 | The court refused to disregard the trustee's solvency report at summary judgment, holding that the bank's objection to the expert's use of liquidation rather than going concern values did not render the report inadmissible. |
| Admitted | Buchwald v. Renco Group539 B.R. 31 | S.D.N.Y. 2015 | After a jury verdict for the trustee, the court held that the trustee's discounted cash flow solvency testimony met the Rule 702 reliability standard, treating attacks on the company-specific risk premium and the rejection of the market approach as matters for cross-examination, and the Second Circuit affirmed the judgment. |
Each case links to the free opinion text on CourtListener.
Under amended Rule 702
Since December 1, 2023, Rule 702 says expressly that the party offering an expert must show the court it is more likely than not that the testimony meets each requirement: that it rests on sufficient facts or data, uses reliable methods, and reflects a reliable application of those methods to the case. Questions about the basis of an opinion are no longer automatically matters of weight for the jury. For how the circuits have applied the amendment, see the Rule 702 tracker, which follows each court of appeals; for what that means for preparing or attacking this class of expert, see the guide on amended Rule 702.
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Last reviewed October 2, 2026. How this page is built: rulings are found by searching court opinions on CourtListener, and each one is read in the opinion before it is summarised here; outcomes are labelled by what the court did with the expert's testimony. No individual expert is named. This page summarises public decisions for orientation and is not legal advice; read the opinion before relying on any ruling.