Contact: John Hartgen
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DELIVERY OF GOODS WITHIN 90 DAYS OF A COMPANY FILING FOR BANKRUPTCY PROVIDES “NEW VALUE” FOR PAYMENTS RECEIVED BY SUPPLIER, ACCORDING TO LATEST ABI POLL

October 29, 2007, Alexandria, Va. —A majority of respondents (68 percent) to ABI’s latest online poll agreed that a payment to a supplier for contractually obligated delivery of goods within 90 days of a debtor company filing for bankruptcy does not constitute a preference payment. Forty-eight percent of respondents “strongly agreed” and 20 percent “somewhat agreed” that a payment to a supplier for contractually obligated delivery of goods within 90 days of a debtor company filing for bankruptcy provides “new value” that would allow the supplier to keep the payment.

Twenty-five percent of respondents, however, did not agree that a payment to a supplier for contractually obligated delivery of goods within 90 days of a debtor company filing for bankruptcy provided “new value” that would allow the supplier to keep the payment.  Twelve percent “strongly disagreed” and 13 percent “somewhat disagreed” that a supplier’s delivery of goods it was contractually obligated to furnish provides “new value” that would allow the supplier to keep a payment the debtor made within 90 days of filing for bankruptcy. Six percent of the respondents did not know or had no opinion on the issue.

Under the Bankruptcy Code, a debtor or trustee may generally seek to recover payments of debt made by the debtor to a supplier within 90 days before the debtor files for bankruptcy, known as a preference payment. However, the Code also provides a “new value” exception so that a creditor may continue to extend credit and that the creditor will receive the value of any prior payment that would otherwise be considered a preference. The poll question was based on a case in which the Seventh Circuit Court of Appeals in In re Globe Building Materials Inc. rejected a “new value” claim of a supplier because it was contractually obligated to deliver goods before it had received the payment.

ABI members and members of the public were welcome to submit their response to the statement: “A supplier's delivery of component parts it was contractually obligated to furnish, within 90 days of a debtor's bankruptcy filing, provides ‘new value’ that would allow the supplier to keep a payment the debtor made to it during that period for such parts. (Gouveia v. RDI Group (In re Globe Building Materials, Inc.), 7th Cir. No. 05-4749 (5/4/07))”

ABI’s 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.