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ABI Poll Respondents Divided Over Whether an Undersecured Creditor Can Claim New Value for Debtor Payments Received Within 90 Days of Filing

Contact: John Hartgen
             703-739-0800
             jhartgen@abiworld.org

ABIPOLL RESPONDENTS DIVIDED OVER WHETHER AN UNDERSECURED CREDITOR CAN CLAIM “NEW VALUE” FOR DEBTOR PAYMENTS RECEIVED WITHIN 90 DAYS OF FILING

June 18, 2007, Alexandria, Va. — Respondents to ABI’s latest online poll were divided over whether an undersecured creditor who received payments from a debtor within 90 days of the debtor’s filing can properly claim that an agreement not to foreclose on collateral constitutes “new value” under §547(c)(4). Half of the respondents agreed as 35 percent “agreed strongly,” while 15 percent “somewhat agreed” that an undersecured creditor who received payments from a debtor within 90 days of the debtor’s filing can properly claim that their agreement not to foreclose on collateral constitutes “new value” under the Bankruptcy Code.

Twenty-seven percent of respondents, however, thought that an undersecured creditor who received payments from a debtor within 90 days of the debtor’s filing could properly claim that his agreement not to foreclose on collateral constitutes “new value” under §547(c)(4).  Fourteen percent “strongly disagreed” and 13 percent “disagreed somewhat” that an undersecured creditor who received payments from a debtor within 90 days of the debtor’s bankruptcy filing could not properly claim that their agreement not to foreclose on collateral constitutes “new value” under the Bankruptcy Code. Twenty percent of the respondents did not know or had no opinion on the issue.

The question comes from the recent Seventh Circuit opinion in In re ABC-Naco No. 06-1719 (7th Cir. Apr. 9, 2007) where the court held that the payments were preferential and should be returned to the estate. (An agreement by an undersecured creditor to forego his right to foreclose on collateral is not new value.)

ABI members and members of the public were welcome to submit their response to the statement: “An undersecured creditor who received payments from a debtor within 90 days of the debtor’s bankruptcy filing cannot properly claim that his agreement not to foreclose on collateral constitutes “new value” under Section 547(c)(4). ” The latest ABI Quick Poll was open to the public for voting from June 1 – June 14.

ABI’s weekly Quick Poll is posted on ABI’s home page, www.abiworld.org. ABI members and the public are invited to respond to a question on a timely bankruptcy or insolvency issue. Visit http://www.abiworld.net/quickpoll/ to access the results of previous ABI Quick Polls.

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ABI is the largest multi-disciplinary, nonpartisan organization dedicated to research and education on matters related to insolvency. ABI was founded in 1982 to provide Congress and the public with unbiased analysis of bankruptcy issues. The ABI membership includes nearly 11,500 attorneys, accountants, bankers, judges, professors, lenders, turnaround specialists and other bankruptcy professionals, providing a forum for the exchange of ideas and information. For additional information on ABI, visit www.abiworld.org. For additional conference information, visit http://www.abiworld.org/conferences.html.