Avoidance Powers in a Chester County Bankruptcy

Last month I wrote about the Trustee's turnover powers.  Now, this month, I'm going to review the Trustee's avoidance powers under 11 U.S.C. 547 & 548.  

This power is one of the long-arm powers of the Trustee, where they essentially say "Stop what you're doing and give it back."  Specifically, they can avoid both pre-petition and post-petition transactions, even if those transactions were otherwise legally valid.  They do all of this to try and benefit the creditors.  

First, under 547, the Trustee can seek to avoid an agreement because it is a preferential transfer.  This is a transfer of money or property that occurred 90 days prior to filing.  

Examples of Avoidance

Sometimes, you don't care about avoidance in this case.  Some debt collectors could harass you to the point where you pay them a ton of money and they you later file for bankruptcy.  The Trustee could avoid that agreement, get the money back from the creditor, and then distribute the funds pro-rate to all creditors.  Other times, if you repaid a debt to a family member or friend, the Trustee could seek to get that money back.  This is the wrong type of preference.  

The Trustee can get the money back by just writing letters and the recipient agrees or, in the alternative, the Trustee can file an adversarial complaint.