Difference between revisions of "Preferential transfer"
(New page: A '''preferential transfer''' is a transfer of money (or property) by someone in the period just prior to going into bankruptcy. By law those transfers can then be undone or rescinded...) |
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| − | A '''preferential transfer''' is a transfer of money (or property) by someone in the period just prior to going into [[bankruptcy]]. By law those transfers can then be undone or rescinded, and the money retrieved from the recipient, after the debtor goes into | + | A '''preferential transfer''' is a transfer of money (or property) by someone in the period just prior to going into [[bankruptcy]]. By law those transfers can then be undone or rescinded, and the money retrieved from the recipient, after the debtor goes into bankruptcy. |
| − | [[Federal]] law<ref> 11 U.S.C. § 547(b).</ref> defines as '''preferential transfer''' as "any transfer of an interest of the debtor in property -- | + | [[Federal]] law<ref>11 U.S.C. § 547(b).</ref> defines as '''preferential transfer''' as "any transfer of an interest of the debtor in property -- |
"(1) to or for the benefit of a creditor; | "(1) to or for the benefit of a creditor; | ||
| Line 11: | Line 11: | ||
"(4) made -- | "(4) made -- | ||
| − | + | <blockquote> | |
| + | (A) on or within 90 days before the date of the filing of the petition; or | ||
| + | </blockquote> | ||
| − | + | <blockquote> | |
| + | (B) between ninety days and one year before the date of the filing of the petition, if such creditor at the time of such transfer was an insider; and | ||
| + | </blockquote> | ||
"(5) that enables such creditor to receive more than such creditor would receive if -- | "(5) that enables such creditor to receive more than such creditor would receive if -- | ||
| − | + | <blockquote> | |
| + | (A) the case were a case under chapter 7 of this title; | ||
| + | </blockquote> | ||
| − | + | <blockquote> | |
| + | (B) the transfer had not been made; and | ||
| + | </blockquote> | ||
| − | + | <blockquote> | |
| + | (C) such creditor received payment of such debt to the extent pro- vided by the provisions of this title." | ||
| + | </blockquote> | ||
| + | |||
| + | == Defenses == | ||
| + | |||
| + | A strong defense against a claim challenging a preference transfer is the "ordinary course of business" argument: | ||
| + | {{cquote|ordinary course of business defense is intended to protect recurring, customary credit transactions that are incurred and paid in the ordinary course of business. ... [A] “trustee may not avoid a transfer as a preference to the extent that such transfer was in payment of a debt incurred by the debtor in the ordinary course of business or financial affairs of the debtor and the transferee, and such transfer was” either “(A) made in the ordinary course of business or financial affairs of the debtor and the transferee; or (B) made according to ordinary business terms.” Davis v. All Points Packaging & Distrib. (In re Quebecor World (USA) Inc.), 491 B.R. 363, 368 (Bankr. S.D.N.Y. 2013) (emphasis added), adopted by, 2013 U.S. Dist. LEXIS 170359 (S.D.N.Y. Nov. 25, 2013).}} | ||
| + | |||
| + | There are multiple additional defenses to a preferential transfer, including: | ||
| + | *a contemporaneous exchange of goods for the debtor's payment, when the parties intended the exchange be substantially contemporaneous, even though the payment may be made several days after receipt of value. | ||
== References == | == References == | ||
<references/> | <references/> | ||
| + | |||
| + | ==See also== | ||
| + | *[[Bankruptcy code]] | ||
| + | |||
| + | [[Category:Bankruptcy]] | ||
| + | [[Category:Bankruptcy Law]] | ||
Latest revision as of 04:17, June 28, 2023
A preferential transfer is a transfer of money (or property) by someone in the period just prior to going into bankruptcy. By law those transfers can then be undone or rescinded, and the money retrieved from the recipient, after the debtor goes into bankruptcy.
Federal law[1] defines as preferential transfer as "any transfer of an interest of the debtor in property --
"(1) to or for the benefit of a creditor;
"(2) for or on account of an antecedent debt owed by the debtor before such transfer was made;
"(3) made while the debtor was insolvent;
"(4) made --
(A) on or within 90 days before the date of the filing of the petition; or
(B) between ninety days and one year before the date of the filing of the petition, if such creditor at the time of such transfer was an insider; and
"(5) that enables such creditor to receive more than such creditor would receive if --
(A) the case were a case under chapter 7 of this title;
(B) the transfer had not been made; and
(C) such creditor received payment of such debt to the extent pro- vided by the provisions of this title."
Defenses
A strong defense against a claim challenging a preference transfer is the "ordinary course of business" argument:
| “ | ordinary course of business defense is intended to protect recurring, customary credit transactions that are incurred and paid in the ordinary course of business. ... [A] “trustee may not avoid a transfer as a preference to the extent that such transfer was in payment of a debt incurred by the debtor in the ordinary course of business or financial affairs of the debtor and the transferee, and such transfer was” either “(A) made in the ordinary course of business or financial affairs of the debtor and the transferee; or (B) made according to ordinary business terms.” Davis v. All Points Packaging & Distrib. (In re Quebecor World (USA) Inc.), 491 B.R. 363, 368 (Bankr. S.D.N.Y. 2013) (emphasis added), adopted by, 2013 U.S. Dist. LEXIS 170359 (S.D.N.Y. Nov. 25, 2013). | ” |
There are multiple additional defenses to a preferential transfer, including:
- a contemporaneous exchange of goods for the debtor's payment, when the parties intended the exchange be substantially contemporaneous, even though the payment may be made several days after receipt of value.
References
- ↑ 11 U.S.C. § 547(b).