Law.com Subscribers SAVE 30%

Call 855-808-4530 or email [email protected] to receive your discount on a new subscription.

Must New Value Remain Unpaid to Serve As a Defense to a Preference Action?

By Russell C. Silberglied and Kimberly D. Newmarch

Does subsequent new value need to be unpaid to constitute a defense to a preferential transfer under section 547(c)(4)? The issue arises when a creditor asserts the subsequent new value defense to a preference action, on the basis that additional credit (goods or services) was extended after the preferential transfer occurred, even if the subsequent new value was paid for by the debtor.

With every decade comes a new wrinkle in the discussion on whether the subsequent new value provided must remain unpaid. The issue has been resurrected recently due to the frequency of critical vendor orders authorizing the post-petition payment of pre-petition debt and debtors-in-possession agreeing to pay reclamation claims in exchange for keeping the goods. What was once previously unpaid “new value” has now been paid, albeit postpetition. Can the creditor still maintain the defense it provided subsequent new value when the new value has been repaid? Focusing on the plain language of the statute reveals the answer is yes. No matter how hard or how many times they try, courts cannot rewrite the precise language of the statute. Put simply, there is no requirement in section 547(c)(4) that in order to qualify for the subsequent new value exception the “new value” must remain unpaid.

This premium content is locked for Entertainment Law & Finance subscribers only

  • Stay current on the latest information, rulings, regulations, and trends
  • Includes practical, must-have information on copyrights, royalties, AI, and more
  • Tap into expert guidance from top entertainment lawyers and experts

For enterprise-wide or corporate acess, please contact Customer Service at [email protected] or 877-256-2473

Read These Next
Bankruptcy Sales: Finding a Diamond In the Rough Image

There is no efficient market for the sale of bankruptcy assets. Inefficient markets yield a transactional drag, potentially dampening the ability of debtors and trustees to maximize value for creditors. This article identifies ways in which investors may more easily discover bankruptcy asset sales.

Judge Rules Shaquille O'Neal Will Face Securities Lawsuit for Promotion, Sale of NFTs Image

A federal district court in Miami, FL, has ruled that former National Basketball Association star Shaquille O'Neal will have to face a lawsuit over his promotion of unregistered securities in the form of cryptocurrency tokens and that he was a "seller" of these unregistered securities.

Why So Many Great Lawyers Stink at Business Development and What Law Firms Are Doing About It Image

Why is it that those who are best skilled at advocating for others are ill-equipped at advocating for their own skills and what to do about it?

Blockchain Domains: New Developments for Brand Owners Image

Blockchain domain names offer decentralized alternatives to traditional DNS-based domain names, promising enhanced security, privacy and censorship resistance. However, these benefits come with significant challenges, particularly for brand owners seeking to protect their trademarks in these new digital spaces.

Coverage Issues Stemming from Dry Cleaner Contamination Suits Image

In recent years, there has been a growing number of dry cleaners claiming to be "organic," "green," or "eco-friendly." While that may be true with respect to some, many dry cleaners continue to use a cleaning method involving the use of a solvent called perchloroethylene, commonly known as perc. And, there seems to be an increasing number of lawsuits stemming from environmental problems associated with historic dry cleaning operations utilizing this chemical.