FRAUDULENT CONVEYANCES Nassau Academy of Law CLE Live ...

397 B.R. 642 Page 14397 B.R. 642(Cite as: 397 B.R. 642)Cross-Motion as to Count 5 of the Amended Complaintshould be denied.This Court Does Not Reach the Issue of Application ofBFP to a Preference ClaimIn light of this Court's disposition of the Trustee's preferenceclaim, this Court need not and therefore does notreach the issue of the application of BFP v. ResolutionTrust Corp. to a preference claim under Bankruptcy Code§ 547.The "Repayment" of the Parents' Loan was Not a PreferenceThe Trustee argues that, even if the money provided tothe Debtor and Defendant by Defendant's parents is considereda loan, the "repayment" of the $61,000 Debtorallegedly owed the parents should still be set aside as animpermissible preference to an insider pursuant to Section547. As noted above, the repayment of the parents' loanoccurred more than ninety days prior to the Petition Date.As there is no genuine issue of material fact as to Debtor'ssolvency during that period, Defendant's parents did notreceive an insider preference.This Court Rejects Defendant's Affirmative Defenses tothe Preference ClaimThis Court rejects Defendant's affirmative defenses to theTrustee's preference claim. Defendant asserts that the repaymentof the parents loan was not a preference based onthe defense of "contemporaneous exchange" underBankruptcy Code Section 547(c)(1), and as a support obligationunder Section 547(c)(7). Defendant asserts asfollows:The defendant in return for obtaining the debtor's halfinterest in the marital residence, gave up a basket ofitems as outlined in her Affidavit. This is clearly the"contemporaneous exchange" referred to in BankruptcyCode § 547(c)(1), as a defense to a preferential transferclaim. In fact, the Judgment of Divorce treats the maritalresidence transfer and the settlement agreement as"contemporaneous." (Exhibit C, page 7, paragraph b)16. As a further defense to this preferential claim underBankruptcy Code § 547, the defendant in her answer tothe amended complaint refers to Bankruptcy Code §547(c)(7) which provides that a bona fide payment of adebt to a spouse, former spouse or child of the debtorfor alimony, maintenance or support for such spouse orchild in connection with a separation agreement, divorcedecree or other order of a court of record made inaccordance with a state law or property settlementagreement is a defense to a preferential transfer claim.Clearly § 547(c)(7) was intended to protect spouses orformer spouses against the preferential payment claimsby trustees.[dkt items 15].[15] Defendant's affirmative defense of contemporaneousexchange under Section 547(c)(1) is rejected. The obligationsto Defendant's parents that arose prior to or evenduring the course of the divorce proceedings were notcontemporaneous exchanges with the Transfer, nor werethose exchanges intended to be contemporaneous. Thoseobligations preceded the Transfer and were released as aresult of the Transfer.[16] Moreover, the parents' loan does not qualify for theaffirmative defense under Section 547(c)(7). As Section547(c)(7) stood prior to the enactment of BAPCPA, thisdefense was for payments made on a *659 bona fide debtto the extent made for alimony, maintenance or support ofthe spouse or former spouse of the debtor or a child of thedebtor. Here, the parents' loan does not qualify for thisdefense.ConclusionSummary judgment will be granted in favor of Defendantand denied as to the Trustee on Counts 1, 2, 3, and 5 ofthe Trustee's Amended Complaint. Summary judgment isdenied as to both parties on Counts 4, 6, 7, and 8. A trialdate will be scheduled by the Court on these remainingclaims. A separate judgment hereon will be entered.397 B.R. 642END OF DOCUMENT© 2009 Thomson Reuters. No Claim to Orig. US Gov. Works.