PBCBA BAR BULLETINS pbcba_bulletin_october 2018 | Page 9

BANKRUPTCY C o r n e r
That New Value You Gave Can Be Paid For
JASON S. RIGOLI
In bankruptcy a policy is equality among
creditors of a class, i.e. general unsecured
creditors. One of the tools for reaching this
policy is the ability to avoid and recover a
“preference payment.” 11 U.S.C. §§ 547(b)
and 550. The purpose behind § 547(b) is
to prevent a debtor from preferring one
creditor or group of creditors over another
and marshalling the debtor’s remaining
assets to a preferred creditor. The elements
to a void a preference payment are:
debt. See Charisma
Investment Company, N.V. v. Airport
Systems, Inc. (In re Jet Florida System, Inc.),
841 F.2d 1082, 1084 (11th Cir. 1988); 11 U.S.C. §
547(c)(4).
(A) not secured by an otherwise unavoidable
security interest; and
(B) on account of which new value the debtor
did not make an otherwise unavoidable
transfer to or for the benefit of such creditor;
11 U.S.C. § 547(c)(4). “The starting point in
statutory interpretation is the language of
the statute itself.” BFW Liquidation, at *5
(internal quotation marks and citations
omitted).
In reviewing § 547(c)(4) the
Eleventh Circuit found the new value
language to be clear and unambiguous,
stating:
This Circuit has proceeded under the theory
that “new value” must remain unpaid as of
the petition date for a target of an avoidable
preference payment.
See Jet Florida,
841 F.2d at 1083 (“[S]ection [547(c)(4)] has
generally been read to require: (1) that the
a transfer of an interest of the debtor in creditor must have extended the new value
property--
after receiving the challenged payments,
(1) to or for the benefit of a creditor;
(2) that the new value must have been By its plain terms, then, the statute only
(2) for or on account of an antecedent debt unsecured, and (3) that the new value must excludes “paid” new value that is paid for
owed by the debtor before such transfer remain unpaid.”).
with “an otherwise unavoidable transfer.”
was made;
See id. § 547(c)(4)(B). Therefore, so long as
(3) made while the debtor was insolvent;
The Eleventh Circuit Reverses, finding Jet the transfer that pays for the new value is
(4) made--
itself avoidable, that transfer is not a barrier
Florida’s Discussion to be Dicta
(A) on or within 90 days before the date of
to assertion of § 547(c)(4)’s subsequent-
the filing of the petition; or
In In re BFW Liquidation, LLC, Case No. 17- new-value defense. See Id.
(B) between ninety days and one year before 13588, -- F.3d --, 2018 WL 3850101 at *3 (11th
the date of the filing of the petition, if such Cir. Aug. 14, 2018), the brought the issue of BFW Liquidation, LLC, at *6. Accordingly, if
creditor at the time of such transfer was an whether new value must remain unpaid the new value is paid for and that payment
insider; and
on direct appeal from the United States is not avoidable under one of the other
(5) that enables such creditor to receive Bankruptcy Court for the Northern District exceptions to § 547(b) then the target
more than such creditor would receive if--
of Alabama to the Eleventh Circuit. In re will not get the benefit of the new value
(A) the case were a case under chapter 7 of BFW Liquidation, LLC, at *3. The BFW Court exception. If, however, the payment for new
this title;
first grappled with the question of whether value is avoidable – or the only exception
(B) the transfer had not been made; and
it was bound by its earlier statement in Jet would be new value under § 547(c)(4) – then
(C) such creditor received payment of Florida, that new value must remain unpaid, the target will get the credit for its new
such debt to the extent provided by the or that statement is dicta. Id. at *4. The value defense. Id. at *12-14.
provisions of this title.
court found its statement in Jet Florida to
11 U.S.C. § 547(b). These elements are be dicta and that it was “’free to give … fresh
Even though the Eleventh Circuit
straight-forward and easy for the trustee consideration’ to the question. Id. at *4-5 found the language to § 547(c)(4) to be
or debtor in possession to meet, especially (citations omitted).
clear and unambiguous, the court took the
where the presumption is that the Debtor
time to go through the legislative history
was insolvent within the 90-days preceding The Eleventh Circuit then began its fresh and policy considerations, strengthening
the petition date. See 11 U.S.C. § 547(f).
look at new value. Section 547(c)(4) states: its conclusion. Id. at * 7-12. This reversal
brought the Eleventh Circuit in line with the
Targets of these preference actions do have The trustee may not avoid under this Fourth, Fifth, Eighth, and Ninth Circuits. Id.
defenses. See generally 11 U.S.C. § 547(c). One section a transfer—
at *6 (citations omitted).
defense is “new value.” New value is where (4) to or for the benefit of a creditor, to
the target gives something of a “material the extent that, after such transfer, such This article is submitted by Jason S.
benefit” to the debtor contemporaneously creditor gave new value to or for the benefit Rigoli, Esq., Furr Cohen, 2255 Glades Road,
in exchange for payment of the antecedent of the debtor—
Suite 301E, Boca Raton, FL 33431, jrigoli@
furrcohen.com
PBCBA BAR BULLETIN 9