Page 70 - Bankruptcy Volume 1

Days Before Petition: 90 Days 60 Days 30 Days 10 Days
(Setoff Date)
Checking Account Balance $ 20,000 $ 10,000 $ 15,000 $ 25,000

Insufficiency? Yes Yes Yes Yes
Insufficiency Amount $ 30,000 $ 40,000 $ 35,000 $ 25,000

In this example, the trustee would be entitled to recover $5,000 or the increase between the $25,000 in-
sufficiency on the setoff date and the $30,000 insufficiency 90 days prior to the petition date. Practition-
ers may quantify statutory insufficiency and provide related expert testimony in conjunction with avoid-
ance actions brought under 11 USC 553(b).

Potentially avoidable setoff activity can be identified using the SOFA, which requires the debtor to dis-
close information regarding all setoffs made by any creditor against a debt of the debtor in the 90 days
preceding commencement of the case.

Other Avoidable Liens (11 USC 724)

11 USC 724(a) grants powers to the trustee in Chapter 7 liquidation to avoid liens securing claims of any
fine, penalty, or forfeiture, or for multiple, exemplary, or punitive damages, arising before the earlier of
the appointment of a trustee and the order for relief, to the extent such are not compensation for an actu-
al pecuniary loss suffered by the holder of such claim.

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