![]() The exact text of Bankruptcy Code section 547 as well as legislative commentary and rules of recent revisions as of January 1, 2005, follows:ĬHAPTER 5 – CREDITORS, THE DEBTOR, AND THE ESTATE If this issue arises, contact an attorney with experience in dealing with preferential payment claims. These claims can sometimes be resolved by demonstrating one of the defenses to the claim or by compromising with the bankruptcy trustee in a discounted settlement. There are other exceptions to the preferential payment rule and this description gives only the most cursory description of Bankruptcy Code section 547 and the body of law that surrounds it. Where the transfer creates a security interest in property acquired by the debtor securing a new value given after signing a security agreement describing the property as collateral and given by or on behalf of the secured party to enable the debtor to acquire the property and where the debtor does acquire the property.Where the payment was made in the “ordinary course of business” between the debtor and creditor (note: this has sometimes been held to mean that invoices must be paid within the time period required on the invoice) or.Where the payment was made as part of a contemporaneous exchange for new value given or.Some common general exceptions to the preferential payment rule are: The impact of this rule is often devastating to those who have received payment and disbursed it to their own creditors and no longer have the funds to pay to the bankruptcy court. When the creditor is an “insider” with the debtor the time period increases from 90 days to one year. Many businesses are surprised to learn that there is a Bankruptcy Code provision, commonly referred to as the “Preferential Payment Rule,” which generally provides that where a debtor makes a payment to a creditor and the debtor files bankruptcy within 90 days thereafter, the creditor can often be forced by the Bankruptcy Court to pay all the sums paid by the debtor back into the bankruptcy estate for distribution to general creditors.
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