Opinion ID: 2647462
Heading Depth: 5
Heading Rank: 1

Heading: An action proceeding under section 547

Text: . . may not be commenced after the earlier of—
(A) 2 years after the entry of the order for relief; or 19 cause of action accrues as of that date. See 11 U.S.C. § 546. If Congress had intended to allow for post-petition transactions to affect the impact on the estate, it is likely that it would have crafted a different statute of limitations. The fact that the statute of limitations for a preference avoidance action under § 547 generally begins on the petition date suggests that the calculation of preference liability should remain constant post-petition. If we read § 547(c)(4)(B) to allow post-petition payments to defeat a new value defense, the calculation of preference liability could change depending on when the preference avoidance action was filed. Fourth, Appellee argues that extending the preference analysis past the petition date would be inconsistent with the “improvement-in-position” test articulated in § 547(c)(5). This provision provides a defense from preference liability for a creditor with a floating lien on a debtor’s inventory and receivables, so long as the creditor did not improve its position during the preference period. Notably, the provision (B) 1 year after the appointment or election of the first trustee . . . if such appointment or such election occurs before the expiration of the period specified in subparagraph (A); or
dismissed. 11 U.S.C. § 546(a). In a voluntary case, the commencement of the case constitutes an “order for relief.” Id. § 301(b). 20 includes the phrase “as of the date of the filing of the petition.” Appellee avers that because Congress specifically articulated an intention—in an analogous defense to preference liability—to confine the analysis to pre-petition activity, we should assume it had the same intention with respect to the new value defense. The converse could be argued, however; namely, that this omission from § 547(c)(4) was intentional, since Congress knew how to set forth a relevant time period when it thought it applied. Still, on balance, we believe that the policy of improvement of position prior to the petition date is central to the concept of preference. We find this provision to bolster our reasoning Lastly, if we allow post-petition payments to affect the preference analysis, it would seem logical also to consider post-petition extensions of new value to be available as a defense. However, the vast majority of courts that have considered this issue have concluded that new value advanced after the petition date should not be considered in a creditor’s new value defense. See In re Bellanca Aircraft Corp., 850 F.2d 1275, 1284-85 (8th Cir. 1988); In re Rocor Int’l, Inc., 352 B.R. 319, 333 (Bankr. W.D. Okla. 2006); In re George Transfer, Inc., 259 B.R. 89, 96 (Bankr. D. Md. 2001); In re Sharoff Food Serv., Inc., 179 B.R. 669, 678 (Bankr. D. Co. 1995); In re D.J. Mgmt. Grp., 161 B.R. 5, 6 (Bankr. W.D.N.Y. 1993); In re Jolly “N,” Inc., 122 B.R. 897, 909-10 (Bankr. D.N.J. 1991); In re Vunovich, 74 B.R. 629, 632 (D. Kan. 1987); see also In re Kumar Bavishi & Assocs., 906 F.2d 942, 951 n.9 (3d Cir. 1990) (Cowen, J., dissenting) (noting trend among courts to exclude post-petition advances of new value from preference analysis); 4 Norton Bankruptcy Law and Practice 3d § 66:36 (2013) (“[P]ostpetition extensions of unsecured credit to the debtor are not 21 encompassed by § 547(c)(4) and may not be utilized to protect prior preferential transfers.”). But see In re Keydata Corp., 37 B.R. 324, 329 (Bankr. D. Mass. 1983) (approving without discussion setoff of post-petition service against prepetition preferential transfers). Although § 547(c)(4) only specifies that new value be given to a debtor subsequent to a preference payment, courts have read the petition date into the statute as a cutoff. At least one court has found that the logic leading to the conclusion that post-petition new value should not be considered in the preference analysis also applies to the issue before us. See In re Murray, Inc., No. 0413611, 2007 WL 5595447, at  (Bankr. M.D. Tenn. June 6, 2007) (“[T]he Trustee would have the Court conclude that post-petition payments remain in play while post-petition advances of new value are excluded from the analysis under § 547(c)(4). Logically, and as a matter of statutory consistency, the Trustee’s argument fails.”). While, as we noted above, a number of courts have come out the other way on the issue before us, none has made a convincing contextual argument. See Furr’s Supermarkets, 485 B.R. at 730-34 (resting primarily on policy grounds, as we discuss below); Login Bros., 294 B.R. at 300-301 (same); In re MMR Holding Corp., 203 B.R. at 609 (stating that “[a]voidable is avoidable,” and concluding that “[i]t simply does not matter that the avoidable transfer subsequent to the extension of new value is a pre- or post-petition avoidable transfer”); In re D.J. Mgmt. Grp., 161 B.R. at 8 (rejecting argument that just because recovery of post-petition transfer is time-barred under § 549 means that it cannot be considered in calculating amount of preference). Thus we believe that the context of the Code supports the conclusion that post-petition 22 payments by a debtor do not affect a creditor’s new value defense.