Preferences
1.    544—Strong arm clause.
2.    §547—Preferences.  TIB or DIP may avoid transfers of debtor so that prop is brought into estate.
a.    (b) What transfers may be avoided.  If all requirements on list are met, then the transfer can be voided as a preference.
(i)    The transfer to be avoided can be money, property, security interest, etc.
(ii)    Transfers can include things that are involuntary—like a judgment lien or a recording in the real estate records.
(iii)    To be avoidable, the transfer needs to have been made in 90 days b/4 b/r, unless to insider—then look back between 90 days and full year.  A party may be classified as an insider if transfer made to company he is director of and he is also director of the debtor.  §101(31)—defines insider.
(iv)    One factor requires determining if debtor is better off than they would have been if in Ch. 7—so compare real world and hypothetical world. Need to look at what creditor would have gotten on b/r day—if no collateral on b/r day, but fully secured at time of transfer—too bad.  The transfer will be avoidable.
(v)    If transfer was an SI, creditor will be better off if the transfer made him a secured party when he would have otherwise been unsecured.
(vi)    Note that if a creditor goes from being over-secured by a little, to over-secured by a lot, that is not an avoidable transfer b/c they wouldn’t be any better off under Ch. 7 liquidation.
(vii)    If creditor is fully secured, property is destroyed and insurance proceeds are received, the creditor remains fully secured b/c they have an interest in the insurance proceeds—thus, any transfer to them wold not be avoidable as a preference b/c they are not made better off.
(viii)    Under (g), the trustee has the burden of proving the avoidability of the transfer.
(ix)    One of the elements requires that the transfer be made while the debtor is insolvent—this is presumed under (f).  The presumption is rebuttable.
(x)    One of the elements requires that the transfer be for antecedent debt—note that a transfer of an SI may be for antecedent debt if it is deemed to have taken place after attachment b/c of (e)(2).
b.    (c) Transfers that cannot be avoided as preferences.  Creditor asserting an exception has burden of proof.
(i)    (1)—Substantially Contemporaneous Exchange.  Parties need to intend that this be a contemporaneous exchange and it must be substantially contemporaneous.  (Most jurisdictions say that if parties clearly understood that payment would come later—even just the next day, that is not intent to have contemporaneous exchange.  Leg history shows that such intent is in transaction where payment with check and check bounces so you come and give cash).
(ii)    (2)—Ordinary course payments.  Debt needs to be incurred in ordinary course, payment needs to be in ordinary course and terms of payment need to be ordinary business terms.  Following factors to consider:
(1)    If debtor is behind on bill and only paying b/c being threatened w/ discontinuance of service, that doesn’t look like ordinary course.
(2)    If debtor has to use a large amount of income to catch up on a bill in one month, that might not be in ordinary course.
(3)    May look industry wide or just at the company to see if something is in the ordinary course.
(4)    Regular loan payment looks like it is in ordinary course.
(5)    Payment to an insider might take it out of ordinary course status.
(iii)    (3)—purchase money/enabling loan.  Won’t avoid as a preference when creditor has PMSI that is perfected on or before 20 days after the debtor receives possession of the prop.
(iv)    (4)—new value
(v)    (5)—floating lien.  For transfers made in relation to a floating lien (ie, transfer of SI in after acquired prop), take amount that creditor is under-secured on b/r day and subtract amount that creditor was under-secured 90 days before b/r or 1 year b/4 b/r if made to an insider or on the date on which new value was first given under the SA creating the SI if that is later than first two dates.  If you get a positive amount, that will be avoidable as a preference b/c that is the amount that the creditor was able to improve his position.  Note that if you are fully secured on relevant look-back day, you can never be better off on b/r day.
(vi)    (6)—statutory lien
(vii)    (7)—bona fide alimony/child support payment
(viii)    (8)—if debtor has mainly consumer debts, and value of transfer is less than $600.
c.    (e) When SI is perfected and when transfer is deemed to have occurred.
(i)    (e)(2)—a transfer is made (A) at the time it attaches if it is perfected at or w/in 10 days of attachment—except as provided in (c)(3)(B) if it is an enabling loan, (B) at the time of perfection if it is perfected more than 10 days after attachment or (C) immediately before the filing of the pet, if the transfer is not perfected at the later of (i) the commencement of the case or (ii) 10 days after attachment.  (This could have effect on whether transfer of SI is for antecedent debt.  Note that the important date is when there was attachment—different than (c)(3)(B) which is concerned w/ when the debtor received possession.)
(ii)    (e)(3)—A transfer is not made until the debtor has acquired right in the property.  (So, if creditor has lien on all current and after-acquired property (or accounts receivable), the transfer of the SI in the after acquired prop is not made until the debtor gets it.  If this is w/in the 90 days before b/r and it makes the creditor better off than they would have been (ie, under to over-secured), then it will be avoided if all other requirements met.)
3.    Earmarking Doctrine.  There is no preferential payment if an old creditor is just replaced w/ a new one.  Ex.  Owe Creditor A 50k and get loan from Creditor B to pay creditor A.
a.    Debtor needs to not have control over any of the debt.  For this to work, need to clearly indicate in loan documents that money will go directly to A—never under dominion and control of the debtor and so never his property.  If the debtor simply tells the bank to pay—that looks like he had control, and the doctrine won’t apply.
b.    If new creditor gets SI, when old creditor had none, trustee will try to avoid that SI as an indirect preference.  In above example, say that B got a 20k SI and A had no SI.  The 20k SI won’t look like a transfer for antecedent debt b/c it was only given when 50k provided by B.  Trustee will argue that it was for the benefit of A, and thus transferred on account of antecedent debt—so should be avoided as indirect preference making B unsecured.  At that point, B may try to sue A to get money back since this is not what he bargained for.
4.    Indirect Benefit—if debtor pays off a fully secured senior creditor, then the junior creditor will be elevated to secured status and thus receives an indirect benefit.  That could be avoided as a preference under 547(b).
5.    Transfers may also be avoided as pref under UFTA.  (See above).
6.    §545 avoidance of statutory liens:  essentially invalidate two kinds of liens:
a.    If the state statute requires some perfection procedure (like filing in land records), and it has not been done, then it is like any unperfected security interest and it can be avoided
b.    A b/r only lien—a lien under state law that is only triggered by b/r or insolvency can be avoided.
7.    §550—liability of transferee’s for avoided transfers.