{"id":2475,"date":"2014-01-09T09:00:43","date_gmt":"2014-01-09T14:00:43","guid":{"rendered":"https:\/\/nybankruptcy.net\/main\/?p=2475"},"modified":"2018-12-06T02:33:51","modified_gmt":"2018-12-06T02:33:51","slug":"5-elements-the-bankruptcy-trustee-must-prove-to-avoid-a-preference","status":"publish","type":"post","link":"https:\/\/nybankruptcy.net\/main\/5-elements-the-bankruptcy-trustee-must-prove-to-avoid-a-preference\/","title":{"rendered":"5 Elements the Bankruptcy Trustee Must Prove to ‘Avoid’ a Preference"},"content":{"rendered":"

One of the more common things to happen in a New York bankruptcy case is the debtor will pay a favored creditor before filing the petition to give that creditor an advantage over the others in the bankruptcy proceeding. The bankruptcy code frowns on this behavior because it attempts to treat all creditors equally according to its own priorities, not debtors’. Consequently, a section of the code, \u00a7 547<\/a>, is dedicated to these payments, called “preferences,” and lists the elements the trustee must prove in an adversary proceeding to compel the favored creditor to “avoid” (as in make “void,” not “evade” as the word is commonly used) the payment it received and transfer it to the bankruptcy estate.<\/p>\n

The trustee may avoid the transfer of an “interest of the debtor in property” if it is:<\/p>\n

(1) \u00a0To or for the benefit of the creditor<\/p>\n

(2) \u00a0For an \u201cantecedent debt\u201d owed to the creditor before the transfer<\/p>\n

(3) \u00a0Made while the debtor is “insolvent”<\/p>\n

(4) \u00a0Made within 90 days of the petition, or between 90 days and one year of the petition if the creditor was an “insider” (family members, business partners, etc.)<\/p>\n

(5) \u00a0\u00a0More than the creditor would have received if the debtor’s case were filed in chapter 7<\/p>\n

Some of these points are easier to establish than others. The first one speaks for itself: Money benefits people because it has value.<\/p>\n

As for the second, \u201can antecedent debt\u201d simply means it\u2019s preexisting, unlike, for example, a contemporaneous exchange between two parties. A debtor might be able to disprove the payment is a debt if the transfer is a unilateral gift; however, those can be undone through “fraudulent conveyance” claims and not bankruptcy preference actions.<\/p>\n

In the third point, “insolvent” in a preference action is strictly a balance sheet matter: Are the debtor\u2019s liabilities greater than his or her assets? Section 547(f) of the bankruptcy code creates a presumption that the debtor is insolvent 90 days before bankruptcy.It’s pretty hard to disprove insolvency outside of an unusual situation, like if the debtor paid a creditor, was robbed, and suddenly couldn’t make his or her regular payments.<\/p>\n

The fourth point reinforces the third: payments made more than 90 days before the bankruptcy filing usually receive less scrutiny than those within 90 days. However, trustees will investigate payments made to insiders, like family members, before filing. Often it\u2019s best to wait one year before filing after the preference is made.<\/p>\n

Finally, the fifth point is sort of a “no-harm-no-foul” clause that recognizes that if the creditor would have received the payment out of the bankruptcy estate anyway, then there’s no reason to avoid it.<\/p>\n

Preferences aren’t just a problem for debtors. For creditors, being named in an avoidance action means the trustee will attempt to recover the money they received and return it to the bankruptcy estate, even when creditors had no idea a bankruptcy filing was forthcoming. Thus, experienced New York bankruptcy lawyers will find out if the debtor has made a preference and if necessary attempt to undo it outside of court before the petition is filed.<\/p>\n

Creditors can also benefit from bankruptcy lawyer representation because a valid defense might be raised against the trustee, such as the payment being in the normal course of business. In other situations a lawyer can help the creditor can settle with the trustee for less than the value of the payment.<\/p>\n

For answers to more questions about preferences, bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced\u00a0bankruptcy trustee actions<\/a> Bruce Weiner for a free initial consultation.<\/p>\n","protected":false},"excerpt":{"rendered":"

One of the more common things to happen in a New York bankruptcy case is the debtor will pay a favored creditor before filing the petition to give that creditor an advantage over the others in the bankruptcy proceeding. The bankruptcy code frowns on this behavior because it attempts to treat all creditors equally according …<\/p>\n

5 Elements the Bankruptcy Trustee Must Prove to ‘Avoid’ a Preference<\/span> Read More \u00bb<\/a><\/p>\n","protected":false},"author":5,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"default","ast-global-header-display":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","theme-transparent-header-meta":"default","adv-header-id-meta":"","stick-header-meta":"default","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":""},"categories":[16,31,7,36],"tags":[2,57,59],"acf":[],"yoast_head":"\n5 Elements the Bankruptcy Trustee Must Prove to 'Avoid' a Preference -<\/title>\n<meta name=\"description\" content=\"One of the more common things to happen in a New York bankruptcy case is the debtor will pay a favored creditor before filing the petition to give that\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/nybankruptcy.net\/main\/5-elements-the-bankruptcy-trustee-must-prove-to-avoid-a-preference\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"5 Elements the Bankruptcy Trustee Must Prove to 'Avoid' a Preference -\" \/>\n<meta property=\"og:description\" content=\"One of the more common things to happen in a New York bankruptcy case is the debtor will pay a favored creditor before filing the petition to give that\" \/>\n<meta property=\"og:url\" content=\"https:\/\/nybankruptcy.net\/main\/5-elements-the-bankruptcy-trustee-must-prove-to-avoid-a-preference\/\" \/>\n<meta property=\"og:site_name\" content=\"Bankruptcy Attorney in Brooklyn, New York | Rosenberg Musso Weiner\" \/>\n<meta property=\"article:published_time\" content=\"2014-01-09T14:00:43+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2018-12-06T02:33:51+00:00\" \/>\n<meta name=\"author\" content=\"Matt Leichter\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Matt Leichter\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"3 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/nybankruptcy.net\/main\/5-elements-the-bankruptcy-trustee-must-prove-to-avoid-a-preference\/#article\",\"isPartOf\":{\"@id\":\"https:\/\/nybankruptcy.net\/main\/5-elements-the-bankruptcy-trustee-must-prove-to-avoid-a-preference\/\"},\"author\":{\"name\":\"Matt Leichter\",\"@id\":\"https:\/\/nybankruptcy.net\/main\/#\/schema\/person\/75d08d648836eaa13b64bf21273bf4e7\"},\"headline\":\"5 Elements the Bankruptcy Trustee Must Prove to ‘Avoid’ a Preference\",\"datePublished\":\"2014-01-09T14:00:43+00:00\",\"dateModified\":\"2018-12-06T02:33:51+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/nybankruptcy.net\/main\/5-elements-the-bankruptcy-trustee-must-prove-to-avoid-a-preference\/\"},\"wordCount\":608,\"publisher\":{\"@id\":\"https:\/\/nybankruptcy.net\/main\/#organization\"},\"keywords\":[\"Bankruptcy\",\"Preference Lawsuits\",\"Preference Payments\"],\"articleSection\":[\"Bankruptcy\",\"Creditors\",\"Debt\",\"Trustee\"],\"inLanguage\":\"en-US\"},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/nybankruptcy.net\/main\/5-elements-the-bankruptcy-trustee-must-prove-to-avoid-a-preference\/\",\"url\":\"https:\/\/nybankruptcy.net\/main\/5-elements-the-bankruptcy-trustee-must-prove-to-avoid-a-preference\/\",\"name\":\"5 Elements the Bankruptcy Trustee Must Prove to 'Avoid' a Preference -\",\"isPartOf\":{\"@id\":\"https:\/\/nybankruptcy.net\/main\/#website\"},\"datePublished\":\"2014-01-09T14:00:43+00:00\",\"dateModified\":\"2018-12-06T02:33:51+00:00\",\"description\":\"One of the more common things to happen in a New York bankruptcy case is the debtor will pay a favored creditor before filing the petition to give that\",\"breadcrumb\":{\"@id\":\"https:\/\/nybankruptcy.net\/main\/5-elements-the-bankruptcy-trustee-must-prove-to-avoid-a-preference\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/nybankruptcy.net\/main\/5-elements-the-bankruptcy-trustee-must-prove-to-avoid-a-preference\/\"]}]},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\/\/nybankruptcy.net\/main\/5-elements-the-bankruptcy-trustee-must-prove-to-avoid-a-preference\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\/\/nybankruptcy.net\/main\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"5 Elements the Bankruptcy Trustee Must Prove to ‘Avoid’ a Preference\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/nybankruptcy.net\/main\/#website\",\"url\":\"https:\/\/nybankruptcy.net\/main\/\",\"name\":\"Bankruptcy Attorney in Brooklyn, New York | Rosenberg Musso Weiner\",\"description\":\"\",\"publisher\":{\"@id\":\"https:\/\/nybankruptcy.net\/main\/#organization\"},\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/nybankruptcy.net\/main\/?s={search_term_string}\"},\"query-input\":\"required name=search_term_string\"}],\"inLanguage\":\"en-US\"},{\"@type\":\"Organization\",\"@id\":\"https:\/\/nybankruptcy.net\/main\/#organization\",\"name\":\"Rosenberg, Musso & Weiner, LLP\",\"url\":\"https:\/\/nybankruptcy.net\/main\/\",\"logo\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/nybankruptcy.net\/main\/#\/schema\/logo\/image\/\",\"url\":\"https:\/\/nybankruptcy.net\/main\/wp-content\/uploads\/2018\/06\/logo.png\",\"contentUrl\":\"https:\/\/nybankruptcy.net\/main\/wp-content\/uploads\/2018\/06\/logo.png\",\"width\":124,\"height\":108,\"caption\":\"Rosenberg, Musso & Weiner, LLP\"},\"image\":{\"@id\":\"https:\/\/nybankruptcy.net\/main\/#\/schema\/logo\/image\/\"}},{\"@type\":\"Person\",\"@id\":\"https:\/\/nybankruptcy.net\/main\/#\/schema\/person\/75d08d648836eaa13b64bf21273bf4e7\",\"name\":\"Matt Leichter\",\"image\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/nybankruptcy.net\/main\/#\/schema\/person\/image\/\",\"url\":\"https:\/\/secure.gravatar.com\/avatar\/bd20b564e1f526a569ac8b1fc9ef74db?s=96&d=mm&r=g\",\"contentUrl\":\"https:\/\/secure.gravatar.com\/avatar\/bd20b564e1f526a569ac8b1fc9ef74db?s=96&d=mm&r=g\",\"caption\":\"Matt Leichter\"},\"url\":\"https:\/\/nybankruptcy.net\/main\/author\/mleichter\/\"}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"5 Elements the Bankruptcy Trustee Must Prove to 'Avoid' a Preference -","description":"One of the more common things to happen in a New York bankruptcy case is the debtor will pay a favored creditor before filing the petition to give that","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/nybankruptcy.net\/main\/5-elements-the-bankruptcy-trustee-must-prove-to-avoid-a-preference\/","og_locale":"en_US","og_type":"article","og_title":"5 Elements the Bankruptcy Trustee Must Prove to 'Avoid' a Preference -","og_description":"One of the more common things to happen in a New York bankruptcy case is the debtor will pay a favored creditor before filing the petition to give that","og_url":"https:\/\/nybankruptcy.net\/main\/5-elements-the-bankruptcy-trustee-must-prove-to-avoid-a-preference\/","og_site_name":"Bankruptcy Attorney in Brooklyn, New York | Rosenberg Musso Weiner","article_published_time":"2014-01-09T14:00:43+00:00","article_modified_time":"2018-12-06T02:33:51+00:00","author":"Matt Leichter","twitter_card":"summary_large_image","twitter_misc":{"Written by":"Matt Leichter","Est. reading time":"3 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"Article","@id":"https:\/\/nybankruptcy.net\/main\/5-elements-the-bankruptcy-trustee-must-prove-to-avoid-a-preference\/#article","isPartOf":{"@id":"https:\/\/nybankruptcy.net\/main\/5-elements-the-bankruptcy-trustee-must-prove-to-avoid-a-preference\/"},"author":{"name":"Matt Leichter","@id":"https:\/\/nybankruptcy.net\/main\/#\/schema\/person\/75d08d648836eaa13b64bf21273bf4e7"},"headline":"5 Elements the Bankruptcy Trustee Must Prove to ‘Avoid’ a Preference","datePublished":"2014-01-09T14:00:43+00:00","dateModified":"2018-12-06T02:33:51+00:00","mainEntityOfPage":{"@id":"https:\/\/nybankruptcy.net\/main\/5-elements-the-bankruptcy-trustee-must-prove-to-avoid-a-preference\/"},"wordCount":608,"publisher":{"@id":"https:\/\/nybankruptcy.net\/main\/#organization"},"keywords":["Bankruptcy","Preference Lawsuits","Preference Payments"],"articleSection":["Bankruptcy","Creditors","Debt","Trustee"],"inLanguage":"en-US"},{"@type":"WebPage","@id":"https:\/\/nybankruptcy.net\/main\/5-elements-the-bankruptcy-trustee-must-prove-to-avoid-a-preference\/","url":"https:\/\/nybankruptcy.net\/main\/5-elements-the-bankruptcy-trustee-must-prove-to-avoid-a-preference\/","name":"5 Elements the Bankruptcy Trustee Must Prove to 'Avoid' a Preference -","isPartOf":{"@id":"https:\/\/nybankruptcy.net\/main\/#website"},"datePublished":"2014-01-09T14:00:43+00:00","dateModified":"2018-12-06T02:33:51+00:00","description":"One of the more common things to happen in a New York bankruptcy case is the debtor will pay a favored creditor before filing the petition to give that","breadcrumb":{"@id":"https:\/\/nybankruptcy.net\/main\/5-elements-the-bankruptcy-trustee-must-prove-to-avoid-a-preference\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/nybankruptcy.net\/main\/5-elements-the-bankruptcy-trustee-must-prove-to-avoid-a-preference\/"]}]},{"@type":"BreadcrumbList","@id":"https:\/\/nybankruptcy.net\/main\/5-elements-the-bankruptcy-trustee-must-prove-to-avoid-a-preference\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/nybankruptcy.net\/main\/"},{"@type":"ListItem","position":2,"name":"5 Elements the Bankruptcy Trustee Must Prove to ‘Avoid’ a Preference"}]},{"@type":"WebSite","@id":"https:\/\/nybankruptcy.net\/main\/#website","url":"https:\/\/nybankruptcy.net\/main\/","name":"Bankruptcy Attorney in Brooklyn, New York | Rosenberg Musso Weiner","description":"","publisher":{"@id":"https:\/\/nybankruptcy.net\/main\/#organization"},"potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/nybankruptcy.net\/main\/?s={search_term_string}"},"query-input":"required name=search_term_string"}],"inLanguage":"en-US"},{"@type":"Organization","@id":"https:\/\/nybankruptcy.net\/main\/#organization","name":"Rosenberg, Musso & Weiner, LLP","url":"https:\/\/nybankruptcy.net\/main\/","logo":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/nybankruptcy.net\/main\/#\/schema\/logo\/image\/","url":"https:\/\/nybankruptcy.net\/main\/wp-content\/uploads\/2018\/06\/logo.png","contentUrl":"https:\/\/nybankruptcy.net\/main\/wp-content\/uploads\/2018\/06\/logo.png","width":124,"height":108,"caption":"Rosenberg, Musso & Weiner, LLP"},"image":{"@id":"https:\/\/nybankruptcy.net\/main\/#\/schema\/logo\/image\/"}},{"@type":"Person","@id":"https:\/\/nybankruptcy.net\/main\/#\/schema\/person\/75d08d648836eaa13b64bf21273bf4e7","name":"Matt Leichter","image":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/nybankruptcy.net\/main\/#\/schema\/person\/image\/","url":"https:\/\/secure.gravatar.com\/avatar\/bd20b564e1f526a569ac8b1fc9ef74db?s=96&d=mm&r=g","contentUrl":"https:\/\/secure.gravatar.com\/avatar\/bd20b564e1f526a569ac8b1fc9ef74db?s=96&d=mm&r=g","caption":"Matt Leichter"},"url":"https:\/\/nybankruptcy.net\/main\/author\/mleichter\/"}]}},"_links":{"self":[{"href":"https:\/\/nybankruptcy.net\/main\/wp-json\/wp\/v2\/posts\/2475"}],"collection":[{"href":"https:\/\/nybankruptcy.net\/main\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/nybankruptcy.net\/main\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/nybankruptcy.net\/main\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/nybankruptcy.net\/main\/wp-json\/wp\/v2\/comments?post=2475"}],"version-history":[{"count":2,"href":"https:\/\/nybankruptcy.net\/main\/wp-json\/wp\/v2\/posts\/2475\/revisions"}],"predecessor-version":[{"id":8570,"href":"https:\/\/nybankruptcy.net\/main\/wp-json\/wp\/v2\/posts\/2475\/revisions\/8570"}],"wp:attachment":[{"href":"https:\/\/nybankruptcy.net\/main\/wp-json\/wp\/v2\/media?parent=2475"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/nybankruptcy.net\/main\/wp-json\/wp\/v2\/categories?post=2475"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/nybankruptcy.net\/main\/wp-json\/wp\/v2\/tags?post=2475"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}