Preference And Fraudulent Transfer Claims Dismissed After Establishing Fully Secured Status And New Value Defense

The Plaintiff, a Chapter 7 trustee, sued private lenders to recover $278,529.97 in alleged preferential and fraudulent transfers under sections 547 and 548 of the Bankruptcy Code. The transfers represented loan payoff proceeds the lenders received upon the sale of a Denver property securing their $475,000 in loans to the debtor’s closely held real estate business.

Our firm moved to withdraw the reference and engaged in focused discovery to test the Trustee’s core premise that the lenders were not fully secured. Through loan, title, and payoff documentation, we established that the Defendants held properly recorded deeds of trust and were fully secured at the time of each challenged transfer. We also developed and asserted a contemporaneous exchange for new value defense, demonstrating that the transfers were made in exchange for the release of the lenders’ liens on the property at closing.

After serving a detailed position statement and targeted discovery demands confirming that the estate could not show an unsecured component or avoidable transfer, the Trustee agreed to dismiss all claims. The result eliminated $278,529.97 in asserted clawback exposure and vindicated the lenders’ treatment as fully secured creditors in the bankruptcy case.

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