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The Brave New World of Bankruptcy Preferences

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  • Law And Economics


This article examines in detail the amendments made to the bankruptcy preference laws by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. The author was Reporter for a nationwide survey of the preference laws conducted in the late 1990s by the American Bankruptcy Institute, and which recommended several amendments that eventually did become law in the 2005 Act. The article first examines the genesis of the 2005 amendments in that earlier study, and in the Report of the National Bankruptcy Review Commission, which relied heavily on the ABI Report. Then the article analyzes in depth the specific amendments to the preference law, namely: (1) the creation of a safe harbor for small preferences; (2) changes to the venue rules for preference actions; (3) modification of the defense for “ordinary course of business” transfers; (4) changes to the enabling loan safe harbor; (5) amendments to the timing rules regarding liens; (6) the exclusion of payments pursuant to alternative repayment plans; and (7) an attempt by Congress, again, to fix problems relating to recovery from non-insider parties, as against whom the transfer was not avoidable, as first made notorious in the Deprizio case

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