USA Law and Practice Contributed by: Davis Lee Wright, Natalie D. Ramsey, Katherine M. Fix and Rachel Jaffe Mauceri, Robinson & Cole LLP
8.2 Claims to Set Aside or Annul a Transaction or a Transfer
Preferential Transfers A trustee or DIP may avoid any transfer of the debtor’s property 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; • on or within 90 days before the date of the filing of the petition – or between 90 days and one year before the date of the filing of the petition, if such creditor was an insider at the time of the transfer; and • that enables the creditor to receive more than it would receive if the case were a case under Chap - ter 7 of the Bankruptcy Code (11 USC Section 547). Section 547 (c) provides certain affirmative defences to preferential transfers. The most common affirmative defences include: • the ordinary course of business defence; • the subsequent new value defence; and • the contemporaneous exchange of value defence. These defences are fact intensive, and the burden is on the transferee to prove each element of a claimed defence by a preponderance of the evidence.
Only a trustee in a Chapter 7 case or a DIP (or Chapter 11 trustee) in a Chapter 11 case has standing to assert voidable transfer or preference claims. A bankruptcy court may authorise “derivative standing” for the cred - itors’ committee (or even an individual creditor) if the court believes that: • the asserted claims are “colorable”; • the debtor has unjustifiably refused to prosecute the claims; and • pursuing the claims would likely benefit the bank - ruptcy estate. Derivative claims are brought in the debtor’s name for the benefit of all creditors. Avoidance actions may also be assigned to an estate representative (such as a litigation trustee or liquidation trustee) pursuant to the terms of a Chapter 11 reorganisation (or liquida - tion) plan.
528 CHAMBERS.COM
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