Federal Bankruptcy Law OUTLINE I. LEGAL ISSUE. II.

V. INCONSISTENCY AND AMBIGUITY IN THE LAW.

VI. JUDICIAL APPLICATIONS OF THE LAW IN PEFERENCE RECOVERY ACTIONS.

This research examines federal bankruptcy law with a general view toward an identification of what types of obligations may and may not be avoided in bankruptcy. More specifically, the focus of this research is on the avoidance powers of the bankruptcy trustee under the provisions of the bankruptcy act, which states, with reference to obligation preferences, that the trustee is allowed to recover payments made both voluntarily and involuntarily to one creditor in preference over another. This topic is of current general concern, because, to the extent that creditors can secure debtor property in a mannerwhich creates a preference situation, other creditors will suffer financial losses. Further, to the extent that bankruptcytrustees are unable to successfully challenge preference situations, the rights of the debtor, other unsecured creditors, and secured creditors and trust fund beneficiaries will deterior

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ion "must give the creditor more than the creditor would have received upon liquidation and distribution under the chapter proceedings."9 Amendments to the federal bankruptcy law in 1984 permit the "transfer of any property to a creditor up to a value of $600, without the transfer's constituting a preference."10 INCONSISTENCY AND AMBIGUITY IN THE LAW With respect to the avoidance powers of the bankruptcy trustee in relation to preference payments (paragraph 547, United States Bankruptcy Code), the federal bankruptcy law is both consistent and unambiguous. Experts in the field contend that a creditor has little defense against a trustee recovery action in those instances where the bankruptcy trustee can demonstrate that (1) the transfer was the debtor's property, (2) the transfer was in payment of an antecedent debt, (3) the transfer was made within 90 days of the bankruptcy filing, (4) the transfer was made while the debtor was insolvent, and (5) the transfer enabled the creditor to receive more than would have been received if liquidation and distribution of the debtor's assets had occurred.11 A provider of unsecured credit __________ 8Clarkson, Miller, Jentz, and Cross, 572. 9Ibid. 10Ibid. 11T. J. Hurley, "Avoid
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Approximate Word count = 2228
Approximate Pages = 9 (250 words per page)