Source: https://www.southerncaliforniabankruptcylawblog.com/chapter-13/page/3/
Timestamp: 2020-01-29 02:28:38
Document Index: 176392418

Matched Legal Cases: ['§ 547', '§ 547', '§ 547', '§ 547', '§ 1111', '§ 1111']

Chapter 13 | Page 3 of 8 | Southern California Bankruptcy Law Blog
By Nicholas Gebelt on March 27, 2014
Here is the fourth defense against preference avoidance actions, the so-called net result defense.
Defenses To Preference Avoidance Actions, Part IV:
The Net Result Defense
Suppose you borrowed $10,000 from ABC Bank. After paying back ABC Bank the $10,000, you borrowed another $7,000 from ABC Bank. And suppose you filed for bankruptcy protection less than ninety days after repaying the $10,000 to ABC Bank. Can the trustee assigned to your case avoid the $10,000 payment as a preference? The answer to this question is the point of § 547(c)(4):
The trustee may not avoid under this section a transfer — . . . to or for the benefit of a creditor, to the extent that, after such transfer, such creditor gave new value to or for the benefit of the debtor —
(A) not secured by an otherwise unavoidable security interest; and (B) on account of which new value the debtor did not make an otherwise unavoidable transfer to or for the benefit of such creditor.
Based on our discussion of § 547(b), we might conclude that the trustee can recover the entire $10,000. However, § 547(c)(4) limits the recover to the net preference, which is $3,000. Thus, while you repaid $10,000, the net benefit that ABC Bank derived from the transaction was only $3,000 because it gave you $7,000 after the repayment.
Put another way, when you paid the bank $10,000, your subsequent bankruptcy estate was diminished by $10,000. When the bank later gave you $7,000, the subsequent bankruptcy estate was replenished by $7,000, leaving a net shortfall of $3,000. Therefore, the trustee would only be able to recover $3,000 rather than the entire $10,000.…
By Nicholas Gebelt on March 26, 2014
Here is the third defense against preference avoidance actions, the so-called security interest defense.
Defenses To Preference Avoidance Actions, Part III:
The Security Interest Defense
Suppose you wish to buy a new car that costs $30,000, but you don’t have $30,000. Your solution is to borrow money for the purchase. The lender wants some assurance…
Preferential Transfers IV: Defenses to Preference Avoidance Actions (Part II)
By Nicholas Gebelt on February 21, 2014
This is the second post devoted to defenses against preference avoidance actions. It covers the so-called ordinary course of business defense.
Defenses To Preference Avoidance Actions, Part II:
The Ordinary Course Of Business Defense
Suppose a corporate debtor in Chapter 11 has a lease on the building in which it conducts its business. Suppose the debtor has lease payments of $25,000 per month. If it makes its usual on-time payments during the ninety-day prepetition period — i.e., a total of $75,000 — will the DIP (the Debtor-in-Possession, who is the debtor serving as a quasi-trustee) successfully avoid those payments? Based on 11 U.S.C. § 547(c)(2), the answer is “no”:
The trustee may not avoid under this section a transfer — . . . 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 —
Although this Code subsection appears to have two possible conditions ((A) and (B)), each of which focuses on the nature of the payments, there is a third crucial requirement embedded in the introductory language: the underlying debt itself must have been incurred in the ordinary course of business. …
By Nicholas Gebelt on February 12, 2014
Defenses against a preference avoidance action. …
Preferential Transfers III
By Nicholas Gebelt on February 11, 2014
The trustee can undo preferential transfers, so the debtor loses the imagined benefit from making the payment. …
Nicholas Gebelt is speaking on “Adversary Proceedings in Chapter 13”
By Nicholas Gebelt on September 26, 2013
I will be discussing “Adversary Proceedings in Chapter 13” on Morgan King’s Friday Teleconference on Friday, September 27, 2013 at noon PST. Mr. King’s Friday teleconferences are for bankruptcy and tax professionals, addressing topics of importance to consumer bankruptcy professionals. More information can be found at www.FridayConference.com
The § 1111(b) Election In Chapter 11 Bankruptcy
By Nicholas Gebelt on July 15, 2013
I recently had an email exchange with a fellow bankruptcy attorney who was a little confused about something called the § 1111(b) election in a Chapter 11 bankruptcy. Her confusion was easy to understand because there are some interesting wrinkles in the statutory language that are worth exploring.
Before we get into the somewhat arcane aspects of today’s topic, it might be worth defining a few important terms that we’ll be using, and then summarizing the salient features of Chapter 11 bankruptcy.…