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
Contact: John Hartgen
GOODS WITHIN 90 DAYS OF A COMPANY FILING FOR BANKRUPTCY PROVIDES
“NEW VALUE” FOR PAYMENTS RECEIVED BY SUPPLIER, ACCORDING TO
October 29, 2007,
Alexandria, Va. —A majority of respondents (68 percent)
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.