Loan Payments to Secured Creditors as Preferences Under the 1984 Bankruptcy Amendments

Authors

Richard F. Duncan, University of Nebraska College of LawFollow

Date of this Version

1985

Citation

Nebraska Law Review (1985) 64: 83-91.

Comments

Copyright 1985, Nebraska Law Review. Used by permission.

Abstract

The recent bankruptcy amendments made significant revisions in the law of preferences. At least one of these changes, the elimination of the forty-five day rule from section 547(c)(2), has the potential of rendering the trustee impotent against creditors who receive preferential loan payments while other creditors go unpaid. If this possibility materializes, the primary policy of bankruptcy preference law, equality of distribution among similarly situated creditors, will be severely undercut. The bankruptcy courts should respond by construing the ordinary course requirement strictly so as to avoid extending its protection to preferential payments of long-term loans and other atypical financings. If Congress wishes to repeal the law of preferences in bankruptcy, it should act clearly and expressly. It has failed to do so in its revision of section 547(c)(2).