In this appeal, we must decide whether a debtor in bankruptcy may set aside under section 548(a)(2) of the Bankruptcy Code (the Code), 11 U.S.C. § 548(a)(2) (Supp. IV 1986), the sale of his personal residence upon foreclosure of the mortgage. The bankruptcy court and the district court held that he could not. We reverse and remand for further proceedings.
I
Background
A. Statutory Background
Section 548 of the Code provides in pertinent part:
§ 548. Fraudulent transfers and obligations
(a) The trustee may avoid any transfer of an interest of the debtor in property, or any obligation incurred by the debtor, that was made or incurred on or within one year before the date of the filing of the petition, if the debtor voluntarily or involuntarily—
(2)(A) received less than a reasonably equivalent value in exchange for such transfer or obligation; and
(B)(i) was insolvent on the date that such transfer was made or such obligation was incurred, or became insolvent as a result of such transfer or obligation; ....
11 U.S.C. § 548(a)(2) (Supp. IV 1986).
This provision sets forth four elements that must be established before a debtor 1 *817 may set aside a transfer of property. These are: (1) the debtor had an interest in the property transferred; (2) the debtor was insolvent at the time of the transfer or became insolvent as a result of the transfer; (3) the transfer occurred within one year of the filing of the bankruptcy petition; and (4) the transfer was for less than a “reasonably equivalent value.” The parties agree that the debtor has established each of these elements except the last. 2 Therefore, the only issue before us is whether the debtor received less than a reasonably equivalent value for the property in question.
B. Facts
The facts are stipulated. The debtor-appellant Donald Eugene Bundles has maintained a residence in Indianapolis, Indiana since 1964. Sometime in 1984 and 1985, due to various financial and health problems, Mr. Bundles was unable to meet his mortgage payments. On March 4, 1985, the mortgagee, Indiana National Bank (INB), commenced an action in state court seeking foreclosure of Mr. Bundles’ residence. On July 10, 1985, the state court entered a default judgment against Mr. Bundles in the amount of $4,696.46. In addition, an IRS tax lien against the real estate was reduced to a personal judgment against Mr. Bundles in the amount of $2,666. A sheriffs sale of Mr. Bundles’ residence was scheduled and held on September 11, 1985, after proper notice and in compliance with Indiana foreclosure law. As of this date, Mr. Bundles was insolvent. The property was purchased at the sale by William J. Baker for $5,066.80. The value of the property at this time was $15,500. 3 On September 12, 1985, Sheriff James L. Wells of Marion County executed a deed to Mr. Baker conveying Mr. Bundles’ residence to him. The deed to the property was recorded on September 24, 1985.
On September 25, 1985, after the foreclosure and sale of his residence, Mr. Bundles filed a voluntary petition under Chapter 13 of the Code. Thereafter, on November 14, 1985, he filed a complaint in the bankruptcy court to set aside the foreclosure sale as a fraudulent conveyance. The complaint named as defendants Mr. Baker, the purchaser of his home; INB, the foreclosing mortgagee; and James C. Wells in his official capacity as the Sheriff of Marion County, Indiana.
C. The Bankruptcy Court Opinion
Under section 548, as we have noted already, a debtor in bankruptcy may set aside a transfer of his property as a fraud
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ulent conveyance if he received less than a reasonably equivalent value for the property. In this case, the bankruptcy court held that Mr. Bundles had received a reasonably equivalent value for his home and therefore denied his complaint to set aside the transfer. The bankruptcy court determined that “any avoiding effect accorded a low purchase price by Section 548(a)(2)(A) is misplaced and overbroad with respect to regularly conducted, noncollusive foreclosure sales.”
Bundles v. Baker (In re Bundles),
In reaching this conclusion, the bankruptcy court focused primarily on legislative history and legislative intent. First, the court examined the legislative history of the Bankruptcy Amendments and Federal Judgeship Act of 1984 (BAFJA). 4 Although the court found that the plain language of the amended statute allows avoidance of foreclosure sales, it nonetheless determined that this language conflicted with the obvious intent of the drafters of the amendments. This intent, the court concluded, was to “preserve rather than avoid regularly conducted, noncollusive foreclosure sales.” Id. at 934.
Second, the court examined the historical roots of section 548. It noted that section 548 developed from the English law. of fraudulent conveyances dating back to a 1570 statute enacted by the Parliament of Queen Elizabeth I.
Id.
at 935. The purpose of fraudulent conveyance law was “to prevent the debtor from taking deliberate action to hinder, delay, or defraud his-creditors.” Alden, Gross, and Borowitz,
Real Property Foreclosure as a Fraudulent Conveyance: Proposals for Solving the Durrett Problem,
38 Bus.Law. 1605, 1605 (1983). As a result, fraudulent conveyance law originally focused solely on the debt- or’s subjective intent to defraud his creditors. American adaptation of this law in the Code, however, extended its reach “to cases where the objective result of the transaction is detrimental to creditors, whether or not the debtor actually intended such detriment.”
Id.
at 1605-06 (footnote omitted). Despite the shift in American bankruptcy law from focus on subjective intent to focus on objective results, the bankruptcy court concluded that “Section 548(a)(2) [was] designed to produce ‘... the same substantive results as the Statute of 13 Elizabeth [i.e., to invalidate only transfers made with actual intent to defraud].* ’ ”
Bundles,
D. The District Court Opinion
The district court reached a similar result as the bankruptcy court albeit by a somewhat different route. The district court held that “the reasonable equivalency standard should be ... irrebuttably satisfied where property is sold at a regularly conducted, non-collusive foreclosure sale
to a third party purchaser
and where the deed to the property is executed and recorded before the debtor filed his bankruptcy peti
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tion.”
Bundles v. Baker (In re Bundles),
In reaching this result, the district court reviewed the legislative history of the BAFJA and determined that it was inconclusive.
Id.
at 206. Therefore, instead of focusing on statutory interpretation, the district court directed its attention to the policy concerns raised by the parties. The policy issue, in the court’s view, was one of defining the proper relationship between federal bankruptcy law and nonbankruptcy state law. This relationship has been addressed by the Supreme Court in
Butner v. United States,
II
Discussion
We must interpret the phrase “reasonably equivalent value” as applied to a foreclosure sale. Our task is complicated by the fact that reasonably equivalent value is not defined in section 548 or in any other provision of the Code. The courts addressing this issue have expressed a variety of viewpoints. Nevertheless, two basic lines of authority, each espousing a different interpretation of reasonably equivalent value as that term is used in section 548(a)(2)(A), have developed. We begin by reviewing the cases on either side of this difference of opinion among the courts.
A.
The two seminal cases in this area are
Durrett v. Washington National Insurance Co.,
Durrett
was decided under section 67(d) of the former Bankruptcy Act, 11 U.S.C. § 107(d), which employed the term “fair consideration” rather than “reasonably equivalent value.” In reversing the trial court’s determination that a sale price of 57.7 percent of the fair market value of the property on the date of the foreclosure sale was a fair equivalent, the Fifth Circuit stated that it had been unable to locate a decision of any court that approved a transfer for less than 70 percent of the market value of the property.
Durrett,
Durrett
is certainly not without its critics. In
Madrid,
a bankruptcy panel of the Ninth Circuit was the first court to reject
Durrett’s
percentage rule and to articulate a different standard. The
Madrid
court noted that the only case cited by the Fifth Circuit in support of its holding involved a voluntary transfer of real property by the debtor corporation to the mother of the principal stockholder of the debtor corporation.
Based on the above analysis, the
Madrid
court held that “the consideration received at a non-collusive and regularly conducted foreclosure sale” should be presumed to be the reasonable equivalent value for purposes of section 548.
Id.
Applying this holding to the facts before it, the
Madrid
court upheld a foreclosure sale where the debtor received a price between 64 and 67 percent of the market value of the property at the time of the sale. The bankruptcy panel’s opinion in
Madrid
was affirmed by the Ninth Circuit on different grounds.
B.
We begin our analysis, as did the bankruptcy court and the district court, with the language of the statute. Section 548(a)(2)(A) provides that a transfer of the debtor’s property may be set aside if it is transferred for less than a reasonably equivalent value. It makes no distinction between sales that do and sales that do not comply with state law. If we take the statute at its face value, we must conclude that its unambiguous language requires the reviewing court to make an independent assessment of whether reasonable equivalence was given.
Our analysis of the statutory language is not altered by the legislative history of the BAFJA. This legislative history, consisting of an exchange between two Senators recorded after the BAFJA was passed, indicates only that the amendments were not intended to resolve the so-called “Durrett issue.” 8 Furthermore, one of the proposed amendments to the BAFJA dealt specifically with the Durrett-Madrid debate and adopted the Madrid irrebuttable presumption rule. 9 This amendment, however, was not included in the bill that ultimately became law. Accordingly, we believe that the most reasonable interpretation of the legislative history is that Congress did not legislate an irrebuttable presumption in the case of mortgage foreclosure sales.
Nevertheless, INB urges us to adopt state foreclosure law as the federal rule of reasonable equivalence under section 548. Under INB’s theory, if a low sale price does not vitiate a foreclosure sale under state law, the bankruptcy court should not permit the reasonable equivalence standard in section 548 to produce such a result. INB’s argument is similar to the position adopted by the district court. The district court held that state law should be used in fashioning a federal rule; INB appears to argue that the state rule for setting aside a foreclosure sale should be itself controlling,
see
Appellee’s (INB) Br. at 16-17.
10
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INB relies, as did the district court, on the Supreme Court’s opinion in
Butner v. United States,
Butner is inapposite to this case. Here, Congress has not left the determination of property rights to state law. Rather, Congress has enacted a federal rule defining when a foreclosure sale may be set aside in bankruptcy. The Butner Court expressly recognized as much when it said:
The constitutional authority of Congress to establish “uniform Laws on the subject of Bankruptcies throughout the United States” would clearly encompass a federal statute defining the mortgagee’s interest in the rents and profits earned by property in a bankrupt estate. But Congress has not chosen to exercise its power to fashion any such rule. The Bankruptcy Act does include provisions invalidating certain security interests as fraudulent, or as improper preferences over general creditors. Apart from these provisions, however, Congress has generally left the determination of property rights in the assets of a bankrupt’s estate to state law.
Id.
at 54,
We realize that much of the debate over this issue has centered on policy considerations that favor one result over the other.
12
However, “ ‘the meaning of a statute must, in the first instance, be sought in the language in which the act is framed, and if that is plain, and if the law is within the
*823
constitutional authority of the law-making body which passed it, the sole function of the courts is to enforce it according to its terms.’ ”
Central Trust Co. v. Official Creditors’ Comm. of Geiger Enters.,
Implying an irrebuttable presumption would be inconsistent with that language. Such a reading, in effect, creates an exception to the trustee’s avoiding powers under section 548(a)(2)(A)—an exception not otherwise found in the statute—for property sold at a foreclosure sale.
See In re Madrid,
C.
Having determined that there is a federal statutory basis for avoiding a foreclosure sale under section 548(a), we are confronted with the problem of defining that federal standard. As Justice Brandéis once observed, “[vjalue is a word of many meanings.”
Missouri ex rel. Southwestern Bell Tel. Co. v. Public Serv. Comm’n,
In our view, in defining reasonably equivalent value, the court should neither grant a conclusive presumption in favor of a purchaser at a regularly conducted, non-collusive foreclosure sale, nor limit its inquiry to a simple comparison of the sale price to the fair market value. Reasonable equivalence should depend on all the facts of each case. This middle ground has been adopted by several of the bankruptcy courts.
See, e.g., General Indus. v. Shea (In re General Indus.),
The implementation of this approach requires case-by-case adjudication. In determining whether property was sold for reasonably equivalent value, the bankruptcy court must, of course, be mindful constantly of the purpose of section 548’s avoiding powers — to preserve the assets of the estate.
See Martin v. Phillips (In re Butcher),
*825 The inquiry outlined in the foregoing paragraph is necessarily a fact-specific one; it will require the bankruptcy court to draw upon its expertise in evaluating the economic forces at play in a specific case. Once that determination is made, we must accord it great deference. On the other hand, we shall expect the bankruptcy court, while recognizing that it alone has the responsibility to determine whether the transaction meets the federal standard of reasonably equivalent value, to accord respect to the state foreclosure sale proceedings. While the sale price determined in the foreclosure proceeding cannot be considered conclusive with respect to the issue of federal law before the bankruptcy court, it is an important element in the analysis of that question.
Conclusion
We hold that the sale price at a regularly conducted, noncollusive foreclosure sale cannot automatically be deemed to provide a reasonably equivalent value within the meaning of section 548(a)(2)(A). We therefore reverse the judgment of the district court and remand to the bankruptcy court for further proceedings not inconsistent with this opinion.
REVERSED AND REMANDED.
Notes
. Section 522(h) of the Bankruptcy Code, 11 U.S.C. § 522(h) (Supp. IV 1986), permits the debtor to seek avoidance of a transfer under § 548 if the trustee has not done so. See also 4 *817 L. King, Collier on Bankruptcy ¶ 522.30 at 522-98 (15th ed. 1988).
. There is no dispute in this case over whether a foreclosure sale constitutes a “transfer” for purposes of § 548(a).
Compare Durrett v. Washington Nat’l Ins. Co.,
. The parties’ stipulation of facts provides that the property was worth $15,500 on November 14, 1985, the date that Mr. Bundles filed his complaint to set aside the conveyance in the bankruptcy court. Stipulation As To Facts at 2, Record of Proceedings. At oral argument, the appellant indicated that this figure was arrived at after each party had his own appraisal done and a single figure was agreed upon.
. The Bankruptcy Amendments and Federal Judgeship Act (BAFJA) was drafted in 1984 to address, inter alia, the issue in this case. An excellent discussion of the BAFJA’s legislative history is provided by the bankruptcy court in In re Verna:
[The BAFJA] proposed ... three changes in the Bankruptcy Code: (i) [an amendment to] the definition of "transfer" in section 101 of the Bankruptcy Code to specify that it encompasses the “foreclosure of the debtor’s equity of redemption”; (ii) [an amendment to] section 548 to emphasize its applicability to transfers where the debtor "voluntarily or involuntarily” receives less than reasonably equivalent value; and (iii) [an amendment to section 548] granting an irrebuttable presumption of reasonably equivalent value to any mortgagee or third-party purchaser who purchases mortgaged property at a regularly conducted non-collusive foreclosure sale for a price equal to the full amount of the mortgage debt.
. In
Abramson v. Lakewood Bank & Trust Co., 647
F.2d 547 (5th Cir.1981) (per curiam),
cert. denied,
.
See generally
Annotation,
Inadequacy of Price as Basis for Setting Aside Execution or Sheriff’s Sale
—Modem
Cases,
. In affirming the bankruptcy panel’s decision in
Madrid,
the Ninth Circuit held that a foreclosure sale is not a "transfer” within the purview of § 548(a) and declined to address the reasonably equivalent value issue.
In re Madrid,
. The legislative history, cited to us by the parties and relied on by the bankruptcy court, is as follows:
Mr. DeCONCINI. Apparently there may have been some misunderstanding regarding the effect of certain technical amendments made by the recently enacted bankruptcy legislation ... which amended the definition of transfer ... to add the phrase "and foreclosure of the debtor’s equity of redemption,” ... [and amended] section 548(a) ... to add the phrase “voluntarily or involuntary.” A question has arisen whether these amendments somehow support the position taken ... in Durrett_ My understanding is that these provisions were not intended to have any effect one way or the other on the so called Durrett issue. Is my understanding correct?
Mr. DOLE. The Senator’s understanding is indeed correct. ... In deference to Senator METZENBAUM's position, Senator THURMOND agreed to delete from his amendment all provisions dealing with the Durrett issue. ... Consequently, no provision of the bankruptcy bill passed by this body was intended to intimate any view one way or the other regarding the correctness of the position taken ... in the Durrett case, or regarding the correctness of the position taken by ... Madrid,_which reached a contrary result.
... [T]he amendment should not be construed to in any way codify Durrett or throw a cloud over noncollusive foreclosure sales.
... Finally, neither of the [amendments] purport to deal with the question of whether a noncollusive, regularly conducted foreclosure sale should be deemed to be for a reasonably equivalent value.
Mr. DeCONCINI. Then I am correct in concluding that parties in bankruptcy proceedings who seek avoidance of prepetition foreclosure sales would find no support for their arguments in these amendments?
Mr. DOLE. The Senator’s conclusion is correct.
130 Cong.Rec.S. 13771-S.13772 (No. 131, Pt. II, Oct. 5, 1984).
. See supra note 4.
. Under INB’s theory, if state law
permitted
the setting aside of a foreclosure sale based upon inadequacy of price, then presumably so would § 548(a)(2)(A). The parties disagree over the circumstances under which Indiana law would permit a mortgagor to set aside the foreclosure sale of his property. Mr. Bundles asserts that avoidance of the foreclosure sale under § 548(a)(2)(A) does not conflict with state foreclosure law because Indiana courts will set aside a foreclosure sale if the inadequacy of the
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sale price is "so gross as to shock the conscience."
Fletcher v. McGill,
. See U.S. Const. art. I, § 8, cl. 4.
. The central policy concern expressed in the opinions is that permitting avoidance of foreclosure sales under § 548(a)(2) would have a negative effect on the foreclosure market. This concern was best voiced by Judge Clark in his dissenting opinion in
Abramson,
In
Goldberg v. Tynan (In the Matter of Tynan),
. Section 548(a)(1) provides that a trustee may avoid a transfer if the debtor "made such transfer or incurred such obligation with actual intent to hinder, delay, or defraud any entity to which the debtor was or became, on or after the date that such transfer was made or such obligation was incurred, indebted; -” 11 U.S.C. § 548(a)(1) (Supp. IV 1986).
. Section 544(b) provides that;
The trustee may avoid any transfer of an interest of the debtor in property or any obligation incurred by the debtor that is voidable under applicable law by a creditor holding an unsecured claim that is allowable under section 502 of this title or that is not allowable only under section 502(e) of this title.
11 U.S.C. § 544(b) (1982).