In this case, the Court addressed whether the prohibition against transfers to creditors prior to the bankruptcy filing begins from the date of transfer, or runs backward from the date the bankruptcy is filed.

Here, the creditor obtained a judgment lien against the debtor’s property 90 days before the date of the filing of the debtor’s Chapter 13 petition.

A transfer to a creditor, or a lien, within 90 days prior to filing bankruptcy is considered to be a preferential payment to that creditor and said transfer to the creditor can be set aside by the Bankruptcy Court.

Here, the Court noted the majority ruling which favored the approach from counting backward from the petition date. The minority position calculates the preference period by counting forward from the date of the transfer, excluding the transfer date and including the date of the filing for bankruptcy.

The Court adopted the majority position above and held that the bank received a voidable preferential transfer when it obtained a judgment lien against the debtor’s real estate on November 15th, which was 90 days before the date of the filing of the debtor’s Chapter 13 petition.

The debtor’s complaint to set aside the judgment lien obtained by the bank was granted. Arlene Levinson v. Security Savings Bank (U.S. Bkrtcy. S.D. N.Y., Case No. 91-6077).

Author: Charles R. Harroun, Attorney at Law