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State Court Judgment Recorded After Filing of the Bankruptcy is Not a Transfer Under §547(b)(4)

Gallinghouse & Assocs., Inc. v. Black (In re Black), Nos. 15-11935, 15-1071, 15-1073, 2016 Bankr. LEXIS 3495 (U.S. Bankr. E.D. La. Sep. 26, 2016)

The matter came before the court as a trial on the complaint of Joanne and Walter Gallinghouse, Gallinghouse & Associates, Inc., and G & A Publishing against William Matthew Black seeking non-dischargeability of a debt under §§523(a)(4), (6), (7), (13) and (17), and on a separate adversary complaint filed by Black against the Gallinghouses seeking to avoid a preferential transfer under §547.

Debtor William Mathew Black brought an adversary complaint against Defendant Gallinghouse & Assocs., alleging an avoidable preference under §547(b), stemming from the entry of final judgment in a state court civil suit. The only transfer that the Debtor alleged in the adversary complaint was the entry of the state court’s judgment on October 14, 2015. The Debtor filed for bankruptcy on July 31, 2015. The Debtor alleged that because the trial in the state court concluded (the judgment was signed later) before the filing of the bankruptcy petition, the judgment was incurred during the 90-day period required by §547(b)(4) and hence was avoidable as a preference.

The Court found that although the trial was concluded prior to the filing of bankruptcy, the judgment was signed after the commencement of the bankruptcy case. Thus, the requirement of §547(b)(4) that the transfer be made on or within 90 days before the date of the filing of the bankruptcy petition was not met. The Court also determined that the Debtor did not cite any case law to support his proposition and the Debtor’s argument, that the findings of the state court judge constitute a “transfer” under §547(b)(4), was not persuasive particularly because the judgment was not recorded. The Court dismissed the Debtor’s adversary complaint and held that there was no avoidable preference as the elements of §547(b) were not met and there was no pre-petition transfer to the Defendant.