BANKRUPTCY LAW  Preferential Transfer: Can the Transfer Be Unwound?

BANKRUPTCY LAW Preferential Transfer: Can the Transfer Be Unwound?

BANKRUPTCY LAW (Preferential Transfer): A preferential transfer is a payment made within 90 days before the filing of bankruptcy, which is not made in the ordinary course of business. WHEN the trustee or Court finds that the debtor has made such a transfer, the transfer may be unwound, and the money ordered returned to the bankruptcy estate. The creditor who received the money will have to dig into its pockets and return the funds to the court.

In determining whether a payment is a preference, the court can conduct a hypothetical payment analysis to determine whether that payment would have been made had bankruptcy had not been filed. If the creditor received more via the questioned transaction than it would have received in the bankruptcy, then the payment is a preference (“preferential transfer”). In re Tenderloin Health 849 F 3rd 1231, 9th Circuit 2017

BANKRUPTCY LAW (Discharge):​ Relief From Pre-Petition Debts

BANKRUPTCY LAW (Discharge):​ Relief From Pre-Petition Debts

BANKRUPTCY LAW (Discharge):​ A Chapter 7 Petition, and accompanying discharge, provide relief from pre-petition debts. The 9th Circuit Court of Appeal has stated:

A Chapter 7 bankruptcy discharge releases the debtor from personal liability for her pre-bankruptcy debts. . . . A discharge is the “legal embodiment of the idea of the fresh start; it is the barrier that keeps the creditors of old from reaching the wages and other income of the new . . .” If the debtor receives a discharge, the creditor will receive only its pro-rata share of the distribution of the property of the bankruptcy estate . . . . [Para.] Specifically, § 727 of the Bankruptcy Code  ;. . . “discharges the debtor from all debts that arose before the date of the order for relief.” 11 U.S.C. § 727(b). The Code defines “debt” as “liability on a claim.” § 101(12). “Claim” is defined as a “right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured.” § 101(5)(A). “This `broadest possible definition’ of `claim’ is designed to ensure that `all legal obligations of the debtor, no matter how remote or contingent, will be able to be dealt with in the bankruptcy case . . . .'” Boeing N. Am., Inc. v. Ybarra (In re Ybarra), 424 F.3d 1018, 1022 (2005).

 

BANKRUPTCY LAW: Relief From Pre-Petition Debts

BANKRUPTCY LAW: Relief From Pre-Petition Debts

BANKRUPTCY LAW (Discharge): A Chapter 7 Petition, and accompanying discharge, provide relief from pre-petition debts. The 9th Circuit Court of Appeal has stated: A Chapter 7 bankruptcy discharge releases the debtor from personal liability for her pre-bankruptcy debts. . . . A discharge is the “legal embodiment of the idea of the fresh start; it is the barrier that keeps the creditors of old from reaching the wages and other income of the new . . .” If the debtor receives a discharge, the creditor will receive only its pro-rata share of the distribution of the property of the bankruptcy estate . . . . [Para.] Specifically, § 727 of the Bankruptcy Code ;. . . “discharges the debtor from all debts that arose before the date of the order for relief.” 11 U.S.C. § 727(b). The Code defines “debt” as “liability on a claim.” § 101(12). “Claim” is defined as a “right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured.” § 101(5)(A). “This `broadest possible definition’ of `claim’ is designed to ensure that `all legal obligations of the debtor, no matter how remote or contingent, will be able to be dealt with in the bankruptcy case . . . .’” Boeing N. Am., Inc. v. Ybarra (In re Ybarra), 424 F.3d 1018, 1022 (2005).

BANKRUPTCY LAW (Attorney’s Fees)

BANKRUPTCY LAW (Attorney’s Fees)

BANKRUPTCY LAW (Attorney’s Fees): Where Trustee brought, and lost, a claim for fraudulent transfer against the debtor, the debtor could be reimbursed its attorney’s fees under state (Alaska) law. The Trustee would have to pay the fees out of the bankruptcy estate. The case was decided in the Ninth Circuit Court of Appeal, but looked for guidance to the state law and the US Supreme Court. In re Good Taste, Inc., 317 B.R 112 (Bankr. D. Alaska 2004). This case apparently continues to reflect the law in the Ninth Circuit.​

 

BANKRUPTCY LAW (Fraudulent Transfer)

BANKRUPTCY LAW (Fraudulent Transfer)

BANKRUPTCY LAW (Fraudulent Transfer): ​​In the Delaware Bankruptcy Court, the court limited the US Trustee’s attempt to recover a pre-petition transfer. ​The ​Chapter 7 trustee ​tried to recover the full amount of the property as a fraudulent transfer, but the court limited the Trustee to the amount of the creditor’s claim. The court reasoned that the creditor ​would not receive a benefit by obtaining an amount in excess of its claim; that would instead be a windfall. The Trustee is therefore limited to the amount of the claim. Court construed 11 USC Sec. 550(a) and 11 USC Sec. 726(a)(1)–(5).​ ​Giuliano v. Schnabel (In re DSI Renal Holdings, LLC), No. 14-50356, 2020 WL 550987 (Bankr. D. Del. Feb. 4, 2020) ​

 

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