Trustee Should Not Pursue Preference Litigation If There Is Little Left for Unsecured Creditors According to Latest ABI Poll
Contact: John Hartgen
SHOULD NOT PURSUE PREFERENCE LITIGATION IF THERE IS LITTLE LEFT FOR
UNSECURED CREDITORS, ACCORDING TO LATEST
December 4, 2007,
Alexandria, Va. —A majority of respondents (64 percent)
Thirty-one percent of respondents, however, thought that a trustee should pursue preference litigation even if there is little money likely to be left over for unsecured creditors after administrative expenses are paid. Fifteen percent “strongly disagreed” and 16 percent “somewhat disagreed” that a trustee should not pursue even substantial preference litigation if, after the payment of administrative expenses, there is likely little left for unsecured creditors. Two percent of the respondents did not know or had no opinion on the issue.
The U.S. Bankruptcy Court for the Northern District of Texas recently agreed with the trustee in In re Brook Mays Music Co. that pursuing preference litigation, despite transfers totaling more than $12 million by the debtor, would not be necessary as there would have been little chance that unsecured creditors would have realized any benefit. While not issuing a “blanket ruling that preference litigation should never be pursued by a bankruptcy fiduciary if the only parties who benefit are professionals and a secured or undersecured lender,” the court noted that there is nothing in the Bankruptcy Code that requires a preference action to benefit the unsecured creditors.
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.