Business Credit Magazine July/August 2014 | Page 7

to shake a settlement out of the trade creditor. However, while
the Commission has considered this option, it also asked bigger, broader questions about preferences as a function of
Chapter 11.

firmly within the latter group, but that this struggle in the
legal world has really affected preference suits since the enactment of the Bankruptcy Abuse Prevention and Consumer
Protection Act of 2005 (BAPCPA).

“What’s most interesting in the preference area, and this is fascinating because it was Judge [Steven] Rhodes, the judge who
is presiding over the Detroit Chapter 9, at one of the first sessions said ‘guys, you need to look at whether preferences
should be abolished,’” Nathan said. “While that’s very near
and dear to my heart, because I’m not a lover of preferences,
it’s kind of a mental block because we weren’t reviewing it. We
were reviewing other preference issues but Judge Rhodes kept
asking and finally, the third time, he said ‘guys, I want you to
consider whether preferences should be abolished.’”

Furthermore, Peterson tried to highlight some aspects of the
current statute that can actually be good for unsecured vendors. “You all in this room are looking at it from the vantage
point of a trade creditor,” he said. “I’m a trustee. I go after bad
people, particularly Ponzi operators, bust-out operators, so
we’re not typically suing the typical trade creditor. Also the
preference statute can be your friend. I had a very, very large
steel manufacturer and the bank forgot to file the UCC in the
right state and when they finally filed it in the right state, and
by the way this was an 8-figure issue, they did it on the 88th
day before bankruptcy.”

Nathan said that they entertained the thought and said that
this colored much of how the Avoiding Powers Committee
assessed Section 547. “In order to go about whether the preference statute is working or not, you really have to come at it
with whether the statute should be abolished,” he said.
Peterson, who works as a trustee, also raised a number of
issues beyond the realm of a typical trade creditor’s purview.
“Right now in the country there is a struggle between those
lawyers who say ‘let’s throw everything on the wall and see
what sticks’ and those lawyers that say ‘let’s try to calculate the
defenses and give a net amount and a realistic amount because
it really aids in settlement,’” he said, noting that he operates

“Had we not been able to avoid that perfection, unsecured
trade creditors would’ve gotten na