Section 6.12 Chapter 7 Liquidation Equivalent

• Library: Bankruptcy Practice (2007 Ed. + 2015 Cum Supp)

G. (§6.12) Chapter 7 Liquidation Equivalent

(Preferential Effect)

The trustee must establish that the transfer sought to be avoided enabled the creditor to receive more than it would have received in a hypothetical Chapter 7 liquidation had the transfer in question not been made. 11 U.S.C. § 547(b)(5). The key is whether the creditor improved its position by receipt of the transfer. The date for determining whether there has been an improvement in position is the date the case is filed. In re Kroh Bros. Dev. Co., 86 B.R. 186, 189 (Bankr. W.D. Mo. 1988) (See, B.J.).

The law is well-settled that, unless creditors would receive a
100% payout, any unsecured creditor who receives a payment during the preference period is in a position to receive more than it would have received under a Chapter 7...