Issue link: https://mbozikis.ufcontent.com/i/1422521
111 exercise the avoidance powers on behalf of the estate when the debtor-in-possession grants the committee such right or refuses to exercise its avoidance powers. See, e.g., In re STN Enters., Inc., 779 F.2d 901, 904 (2d Cir. 1985); The Official Comm. of Unsecured Creditors on behalf of Cybergenetics Corp. v. Chinery, 330 F.3d 548 (3rd Cir. 2003), cert. denied 124 S.Ct. 530 (2003). 1. Preferences Preferences are prepetition transfers in which a debtor transfers property to creditors within a specified time period prior to its bankruptcy filing, with the result that such creditors, if they were entitled to retain the property transferred to them, would receive a better percentage recovery on account of their prepetition claims than creditors who did not receive similar payments. As a result of this difference in recoveries, the Bankruptcy Code provides the trustee or the debtor-in-possession with the power to avoid preferential transfers. 11 U.S.C. ยง 547. Section 547(b) of the Bankruptcy Code defines an avoidable preference as "any transfer of an interest of the debtor in property" 61 (i) to or for the benefit of a creditor, (ii) on account of an antecedent debt (that is, one owed before the time of the transfer), (iii) made while the debtor was insolvent, 62 (iv) made to an insider within one year prior to the petition date, or to anyone else within ninety days prior to the filing date, and (v) that enables a creditor to receive more than it would have received in a distribution under Chapter 7 of the Bankruptcy Code. According to Section 547(f), a debtor is presumed to have been insolvent on and during the ninety days immediately preceding the petition date. Further, Section 547(i) provides that if the trustee avoids a transfer made between ninety days and one year before the petition date by the debtor to an entity 61 Generally, preferences include the transfer of cash or the granting of a lien on property of the debtor. 62 Under Section 101(32) of the Bankruptcy Code, insolvency is defined by reference to a debtor's assets and liabilities and is sometimes referred to as a "modified" balance sheet test in that while it refers to the items contained in a balance sheet, it does not follow Generally Accepted Accounting Principles when valuing such items. For a complete discussion of the term "insolvent," see Chapter IV.3. above.