In the 1936 case of McKee, Trustee in Bankruptcy v. Paradise, Trustee, the U.S. Supreme Court was asked to determine whether a bankruptcy trustee could recover payments made by an insolvent debtor prior to declaring bankruptcy. The debtor had transferred property and money to his wife before filing for bankruptcy with the intention of defrauding his creditors. The court held that under Section 67e of the Bankruptcy Act, such transfers were voidable as fraudulent conveyances if they occurred within one year prior to filing for bankruptcy and without fair consideration being given in return. Therefore, these assets could be recovered by the trustee on behalf of all creditors.

In the dissenting opinion for McKee, Trustee in Bankruptcy v. Paradise, Trustee (1936), it was argued that the majority's decision to allow a creditor to recover payments made by an insolvent debtor prior to bankruptcy proceedings contradicted established principles of equity and fairness. The dissenting justices believed that such a ruling unfairly penalized creditors who had acted in good faith and without knowledge of the debtor's insolvency. They contended that this could discourage future lending due to fear of potential clawbacks if a borrower later declared bankruptcy. Furthermore, they disagreed with the majority’s interpretation of Section 60b of the Bankruptcy Act as allowing recovery from innocent parties who received payment before bankruptcy was declared; instead arguing it should only apply when there is evidence of fraudulent intent or collusion between debtor and creditor.