In Chapter 11 bankruptcy proceeding in which creditors’ Committee sought return of value of two leases that debtor surrendered back to leasing creditor 52 days prior to debtor filing for bankruptcy, Bankruptcy Judge erred in denying Committee’s request based upon finding that no “transfer” had occurred under 11 USC section 547(b). Debtor’s act of surrendering profitable leases back to leasing creditor could potentially be viewed as improper preferential transfer of assets, where record showed that leases were worth $777,000 to debtor, and thus would have had significant value to other creditors of bankruptcy estate. As such, instant surrender of leases was potentially avoidable, and remand was required for determination of value of surrender of leases, as well as determination of amount debtor had received for said surrender. At remand, creditor receiving surrendered leases may also present any defenses to Committee’s claims to value of said leases.
Federal 7th Circuit Court
Civil Court
Bankruptcy