One of the elements necessary to establish that a preferential transfer has been made under the Bankruptcy Code by the debtor to a creditor is that the
A. Transfer was in fact a contemporaneous exchange for new value given to the debtor.
B. Debtor was insolvent at the time of the transfer.
C. Creditor was an insider and the transfer occurred within 90 days of the filing of the bankruptcy petition.
D. Transfer was made by the debtor with actual intent to hinder, delay, or defraud other creditors.
Answer:B
B is corrent. Under the Bankruptcy Act, one of the elements which must be established in proving that a preferential transfer was made is that the debtor was insolvent at the time of the transfer. The Bankruptcy Act presumes that the debtor is insolvent during the 90 days prior to the date the petition was filed.
A is incorrect. One of the elements which must be present to prove that a preferential transfer has been made is that the transfer involved an antecedent debt. Since this transfer is a contemporaneous exchange for new value given, no antecedent debt was involved, and therefore, a preference is not present.
C is incorrect. A preferential transfer can be made to a general creditor, as well as an inside creditor. If the transfer is made to a creditor who is an insider, the transfer may be voided by the trustee if it occurred within 12 months prior to the filing of the petition.
D is incorrect. There is no need to prove that the debtor actually intended to hinder, delay, or defraud other creditors in order to prove that a preferential transfer occurred. However, the trustee must prove that the transfer allowed the creditor to receive more than s/he would have under a Chapter 7 liquidation proceeding.