Preferential Transfers: A Focus on the 3rd Circuit

Below are materials which I prepared for a presentation I prepared at the annual conference for the 2012 Middle District Bankruptcy Bar Association. This article examines the current status of preferential payment jurisprudence in the Third Circuit (Delaware, Pennsylvania, New Jersey). In general, the preference provision of § 547 permits the trustee to avoid a transfer to a creditor who has received a payment on the eve of the debtor’s bankruptcy. The trustee has the power to reach back and recovery certain payments and transfers of the debtor’s property. This provision aims to ensure that creditors are treated equitably, both by deterring a failing debtor from giving preferential treatment to its most demanding creditors “in an effort to stave off a hard ride into bankruptcy”, and by discouraging creditors from racing to dismantle the debtor. Preferential Transfers: A Focus on the 3rd Circuit