Contact: John Hartgen
703-739-0800
TRUSTEE
SHOULD NOT PURSUE PREFERENCE LITIGATION IF THERE IS LITTLE LEFT FOR
UNSECURED CREDITORS, ACCORDING TO LATEST
w:st='on'>ABI
December 4, 2007,
Alexandria, Va. —A majority of respondents (64 percent)
to
poll agreed that a trustee should not pursue even substantial preference
litigation if, after the payment of administrative expenses, there is
likely little left for unsecured creditors. Forty-eight percent of
respondents “strongly agreed” and 16 percent “somewhat
agreed” that trustees should not pursue preference litigation if
there is likely little left for unsecured creditors after the payment of
administrative expenses.
Thirty-one percent of
respondents, however, thought that a trustee should pursue preference
litigation even if there is little money likely to be left over for
unsecured creditors after administrative expenses are paid.
Fifteen percent “strongly disagreed” and 16 percent
“somewhat disagreed” that a trustee should not pursue even
substantial preference litigation if, after the payment of
administrative expenses, there is likely little left for unsecured
creditors. Two percent of the respondents did not know or had no opinion
on the issue.
The U.S. Bankruptcy Court for
the Northern District of Texas recently agreed with the trustee in In
re Brook Mays Music Co. that pursuing preference litigation, despite
transfers totaling more than $12 million by the debtor, would not be
necessary as there would have been little chance that unsecured
creditors would have realized any benefit. While not issuing a
“blanket ruling that preference litigation should never be pursued
by a bankruptcy fiduciary if the only parties who benefit are
professionals and a secured or undersecured lender,” the court
noted that there is nothing in the Bankruptcy Code that requires a
preference action to benefit the unsecured creditors.
size='3'>ABI
were welcome to submit their response to the statement: “A trustee
should not pursue even substantial preference litigation if, after the
payment of administrative expenses, there is likely little left for
unsecured creditors. (In re Brook Mays Music Co., N.D.
w:st='on'>
size='3'>ABI
title='blocked::http://www.abiworld.org/'
href='http://www.abiworld.org/'>www.abiworld.org.
w:st='on'>ABI
respond to a question on a timely bankruptcy or insolvency issue. Visit
href='http://www.abiworld.net/quickpoll/'>
color='#0000ff'>http://www.abiworld.net/quickpoll/ to access
the results of previous
Quick Polls.
###
ABI is the largest
multi-disciplinary, nonpartisan organization dedicated to research and
education on matters related to insolvency. ABI was founded in 1982 to
provide Congress and the public with unbiased analysis of bankruptcy
issues. The ABI membership includes nearly 11,500 attorneys,
accountants, bankers, judges, professors, lenders, turnaround
specialists and other bankruptcy professionals, providing a forum for
the exchange of ideas and information. For additional information on
ABI, visit www.abiworld.org. For additional conference information,
visit
href='http://www.abiworld.org/conferences.html'>
size='3'>http://www.abiworld.org/conferences.html.