Page 60 - Bankruptcy Volume 1

security interest in personal property to secure its loan without further consideration. 11 USC 547 pro-
vides the trustee with avoidance powers to ensure that these two preferential transfers would not affect
TriangleCo inequitably in CircleCo’s bankruptcy. The authority to avoid preferential — although not
necessarily objectionable — transfers such as these is one of the most important powers granted to the
trustee to aid in ensuring that similarly situated creditors receive equal treatment in bankruptcy. 11 USC
547(b) grants the trustee power to avoid any transfer of an interest in debtor property not carved out by
11 USC 547(c) and 11 USC 547(i) that was made

 to or for the benefit of a creditor;

 for or on account of an antecedent debt owed by the debtor before such transfer was made;

 while the debtor was insolvent;

 within 90 days before the date of the filing of the petition or, in the case of a transfer to an insid-
er, fn 11 within one year before the date of the filing; and

 that enables such creditor to receive more than they would have received in a Chapter 7 liquida-
tion.

11 USC 101(54) defines transfers subject to avoidance under 11 USC 547(b) broadly to mean "the crea-
tion of a lien," "the retention of title as a security interest," "the foreclosure of a debtor’s equity of re-
demption," or "each mode, direct or indirect, absolute or conditional, voluntary or involuntary, of dis-
posing of or parting with property; or an interest in property." Moreover, 11 USC 547(b) explains that
the transfers may be to or for the benefit of a creditor. Thus, transfers that could give rise to preference
actions might include

 wiring money to a creditor or for a creditor’s benefit;

 endorsing a check to a creditor or for a creditor’s benefit;

 garnishing of monies by a creditor or for a creditor’s benefit;

 directing that payments owed to the debtor be made directly to a creditor;

 granting of a security interest in personal property to a creditor or for a creditor’s benefit,

 granting of a mortgage to a creditor to secure a loan;

 executing a trust deed benefitting a creditor; or

 executing a quitclaim deed that transfers the debtor’s interest in real property to a creditor or for
a creditor’s benefit.

As discussed previously herein, the SOFA provides information regarding the debtor’s recent operations
and transfers of property. For parties seeking to identify potential preferential transfers such as those

fn 11 For further information regarding what constitutes an insider under the Bankruptcy Code, refer to 11 USC 101(31).

58 © 2020 Association of International Certified Professional Accountants