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Payments Were Ordinary Under § 547(c)(2)(A) Despite the Uptick in the Amount of the Debt During the Preference and Pre-Preference Period

Maine, September 11, 2017 – Debtor was in the business of buying home construction materials; the Defendant was in the business of selling such materials. The Chapter 7 Trustee, sought to avoid certain transfers made during the 90-day period prior to the petition date as preferences. The Defendant conceded that the transfers were preferences under §547 (b), but asserted affirmative defenses under §547(c)(1) and §547(c)(2). The Trustee argued that the amount of the debt incurred by the Debtor during the ninety-day period was much larger than the amount of the debt incurred during the nine month period preceding petition date. Hence, the said payments were not excepted under §547 (c)(2). The Court concluded that the debts were incurred in arms-length transactions on the same terms as the other trade debts incurred during the prior nine-month period. The Court added that despite the uptick in the amount of debt incurred on the Debtor’s account during the end of 2013 and beginning of 2014, there was no indication that the size of the debt represented purchases that were being made only because the Debtors were experiencing economic distress. The Court entered judgment in favor of the Defendant.

Manhart v. S.W. Collins Co. (In re Tidd), Nos. 14-10089, 16-1002, 2017 Bankr. LEXIS 2565 (U.S. Bankr. D. Me. Sep. 11, 2017)