Section 547

The much-ballyhooed COVID relief bill passed by Congress at the end of last year, in addition to providing for $600 checks to millions of people, includes several COVID-related amendments to the U.S. Bankruptcy Code. Some of these changes will have a significant direct impact, at least temporarily, on the rights of commercial landlords and tenants in chapter 11 cases.

Not uncommonly, a preference complaint fails to adequately allege that the transfers sought to be recovered by the trustee were made “for or on account of an antecedent debt owed by the debtor before such transfer was made”, as required under Section 547(b) of the Bankruptcy Code. Thus, when faced with a complaint to recover alleged preferential transfers, a defendant can proceed in one of two ways: (i) file an answer and raise affirmative defenses, or (ii) move to dismiss under Rule 12(b)(6).

From May 11 to May 13, 2016, SRC Liquidation, LLC International Holdings, LLC (“Liquidating Debtor”), unleashed yet another wave of preference actions, filing approximately 257 additional complaints seeking the avoidance and recovery of allegedly preferential and fraudulent transfers under Sections 547 and 550 of the Bankruptcy Code.  The Liquidating Debtor also seeks to disallow claims of such preference defendants under Sections 502(d) and (j) of the Bankruptcy Code.

In the United States Bankruptcy Court for the District of Delaware, Peter Kravitz, as the Liquidating Trustee of the CWC Creditors Liquidating Trust, filed approximately 106 preference actions on March 15, 2016 seeking the avoidance and recovery of allegedly preferential and fraudulent transfers under Sections 547, 548 and 550 of the Bankruptcy Code, along with the disallowance of claims under Section 502(d) and (j).

In the month of February 2016, Charles A. Stanziale, Jr., in his capacity as the Chapter 7 Trustee of BMT-NW Acquisition, LLC (“Debtor”), filed approximately 49 preference actions seeking the avoidance and recovery of alleged preferential actions under Sections 547 and 550 of the Bankruptcy Code.

By way of background, the Debtor filed a voluntary petition for relief under Chapter 7 of the Bankruptcy Code on February 14, 2014.  On the same day, Mr. Stanziale was appointed as the Chapter 7 trustee to the Debtor’s bankruptcy estate.