In an appeal arising out of a Ponzi scheme by the principals of two entities, the receiver sought to recover funds from a bank allegedly diverted as fraudulent transfers under
Continue Reading In 11th Circuit, Routine Bank Deposits Are Not Transfers Under Florida Uniform Fraudulent Transfer Act

Introduction

Judge Kevin J. Carey, Chief Judge of the United States Bankruptcy Court for the District of Delaware, recently issued a decision in the Pillowtex bankruptcy addressing the ordinary
Continue Reading Recent Decision in Pillowtex Addresses Elements of the Ordinary Course of Business Defense in a Preference Action

Introduction

Earlier this month,  the Official Committee of Unsecured Creditors (the “Committee”) for American Home Mortgage (“AMH”) filed over ninety (90) adversary actions (review one of the Committee’s Complaints here). 
Continue Reading Creditors Committee in American Home Mortgage Bankruptcy Files Over 90 Preference Actions

Introduction

Two weeks ago,  preference actions were commenced against a long list of defendants in the New Century Mortgage (“New Century”) and Tweeter Home Entertainment (“Tweeter”) bankruptcies.  The plaintiff in
Continue Reading New Century Mortgage and Tweeter Home Entertainment Both File Preference Complaints Against Various Defendants

Introduction

The debtor in the Friedman’s bankruptcy recently filed preference complaints against various defendants.  Days later,  Charles Stanziale, the liquidating trustee in the Custom Foods bankruptcy, filed preference complaints against
Continue Reading Preference Actions Filed in Custom Foods and Friedman’s Bankruptcies

Introduction

In January, Mortgage Lenders Network commenced over 65 adversary actions against various defendants, seeking the avoidance and recovery of preferential transfers (read one of the preference complaints here).  As reflected in its complaints,  Mortgage Lenders filed a chapter 11 bankruptcy petition in the Delaware Bankruptcy Court on February 5, 2007. During the ten years prior to its bankruptcy, Mortgage Lenders grew from a small mortgage company with seven employees, to a residential mortgage provider serving 47 states with over 1,700 employees. 

Given the commencement of Mortgage Lenders’ preference program, this post provides a brief summary of the elements and common defenses to preference claims.

Elements to a Preference Claim

In order to establish that a party received a preferential transfer, the plaintiff must prove that payments were received by a creditor on account of an “antecedent debt.” Further, the preferential payments must be made (i.) while the debtor was “insolvent”, (ii.) made within 90 days before the debtor filed for bankruptcy, and (iii.) the payments provide the creditor with more payments than it would receive if the debtor had liquidated under a chapter 7 liquidation.


Continue Reading Mortgage Lenders Network Files Preference Actions

 Introduction

In a recent opinion issued by the Honorable Kevin Gross of the United States Bankruptcy Court, District of Delaware,  the Court addressed the issue of whether a debtor was solvent when it made allegedly preferential transfers to the Defendant.  The Court’s decision provides a helpful analysis of the less frequent "solvency" defense to a preference action.  Further, the decision provides guidance regarding the evidentiary issues that arise when a party raises this defense.

Background

The Court issued its decision in Miller v. Barenberg, et al. (In re Bernard Technologies, Inc.), Adv. No. 06-51017(KG), slip op. (Bankr.D.Del. Dec. 5, 2008).  In Bernard Technologies,  George Miller, the chapter 7 Trustee and plaintiff, sought to recover pre-petition transfers paid to Bernard’s former CEO, Dr. Sumner Barenberg (the "Defendant").  As an alleged "insider," the Trustee sought to recover transfers made to the Defendant during the one year prior to Bernard Technologies (the "Debtor") filing for bankruptcy.  One of the defenses raised by the Defendant was that the Debtor was solvent during both the 90 day preference period, as well as the one year preference period applied to insiders.


Continue Reading Using the Solvency Defense in a Preference Action: In re Bernard Technologies