Section 6.8 Antecedent Debt

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

C. (§6.8) Antecedent Debt

For a transfer to be avoided, it must have been made on an “antecedent debt.” 11 U.S.C. § 547(b)(2). The Bankruptcy Code defines “debt” as a “liability on a claim.” 11 U.S.C. § 101(12). A debt is “antecedent” if it was incurred before the allegedly preferential transfer. In re Armstrong, 291 F.3d 517, 522 (8^th Cir. 2002). A debt is incurred on the date on which the debtor first becomes legally bound to pay. Id. Accordingly, a debt is antecedent to the challenged payment if the creditor would have had a claim against the debtor’s estate before the challenged payment. In re Bridge Info. Sys., Inc., 299 B.R. 567, 573 (Bankr. E.D. Mo. 2003) (McDonald, B.J.). Courts examine state law to determine when a debtor becomes legally obligated to pay a debt. Id.

A debtor becomes liable to pay a debt when it receives goods
or services, not necessarily when payment is due under the applicable agreement between the parties or when the creditor invoices
the debtor. See In re Jones Truck Lines, Inc., 130 F.3d 323, 329
(8^th Cir. 1997); In re Payless Cashways, Inc., 306 B.R. 243, 255–56 (B.A.P. 8^th Cir. 2004). Conversely, the debtor does not incur a debt until the goods or services are provided, notwithstanding a contractual obligation to the contrary. See In re Vanguard Airlines, Inc., 295 B.R. 329, 334 (Bankr. W.D. Mo. 2003) (Venters, B.J.). When the debtor is continuously accruing an obligation to the creditor, such as insurance premiums or rent, the debt is not incurred until it is owed under the contract. See Bridge Info. Sys., 299 B.R. at 571 (obligation to pay insurance premium incurred on the date specified in the policy; grace period does not extend the time in which a debtor becomes obligated to remit premiums on an insurance contract); In re Thomas W. Garland, Inc., 28 B.R. 87, 89 (Bankr...