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
June 18, 2007, Alexandria,
Va. — Respondents to
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.)