Opinion ID: 748623
Heading Depth: 1
Heading Rank: 2

Heading: A Brief Overview.

Text: 8 Section 547 is intended to discourage creditors from racing to dismember a debtor sliding into bankruptcy and to promote equality of distribution to creditors in bankruptcy. See 5 COLLIER ON BANKRUPTCY p 547.01 at p. 547-9 (15th ed. rev.1997). In general, an avoidable preference is a transfer of the debtor's property, to or for the benefit of a creditor, on account of the debtor's antecedent debt, made less than ninety days before bankruptcy while the debtor is insolvent, that enables the creditor to receive more than it would in a Chapter 7 liquidation. See § 547(b). If a transfer is avoidable under § 547(b), the creditor may escape preference liability by proving that it falls within one of the exceptions set forth in § 547(c). Two of those exceptions are at issue in this case, the contemporaneous new value exception in § 547(c)(1), and the subsequent new value exception in § 547(c)(4). Their purpose is to encourage creditors to continue doing business with troubled debtors who may then be able to avoid bankruptcy altogether. 9 In February 1991, Jones owed Central States roughly $2.9 million for past-due fund contributions. Central States agreed to defer that debt by converting it to secured promissory notes and to continue doing business with Jones if Jones accelerated its current contributions by making estimated weekly payments, rather than paying once a month. Under the bankruptcy court and district court rulings, Central States must now return thirteen weekly payments to Jones's bankruptcy estate. Thus, its decision to continue doing business with a troubled debtor, which § 547 is designed to encourage, has increased Central States's unsecured bankruptcy claim by almost $5.7 million. This outcome is inconsistent with the policies underlying § 547. With that preamble, we turn to the specific statutory provisions at issue. 10