In the case of Rawlings v. Ray, 1940, the Supreme Court was asked to determine whether a receiver in bankruptcy could recover payments made by an insolvent debtor prior to declaring bankruptcy. The debtor had transferred money and property to his wife before filing for bankruptcy. The court held that these transfers were fraudulent because they were made with intent to hinder, delay or defraud creditors and therefore should be set aside. This decision established that any transfer of assets done with fraudulent intent can be reversed during a bankruptcy proceeding.

In the dissenting opinion for Rawlings v. Ray, Justice Frankfurter argued that the majority's decision was inconsistent with previous rulings and principles of equity. He contended that a receiver in bankruptcy should not be allowed to recover payments made by an insolvent debtor prior to bankruptcy if those payments were made in good faith and without knowledge of insolvency. In this case, he believed that Mr. Ray had no reason to suspect Mr. Rawlings' impending bankruptcy when he accepted payment for his services as an attorney, thus it would be unfair to require him to return these funds now after providing valuable legal work based on their agreement at the time.